Millions of Americans face persistent financial challenges. Instant payments innovations can help reduce reliance on costly alternatives and promote financial resilience for households living paycheck to paycheck.
Underbanked and Unbanked Households:
(Source: FDIC 2023)
Instant payments can help financial institutions, policymakers, consumers, and community organizations make banking services more accessible and affordable.
By addressing barriers such as high transaction costs and settlement delays, instant payments can reduce reliance on costly alternatives like payday loans and money orders – services that are disproportionately used by low- and moderate-income households.
Instant payments can improve liquidity for households and enable businesses to operate more efficiently. Ultimately, instant payments support a vibrant economy that works for everyone.
“The effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers that allow money to flow on a daily basis. Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation.” – Jerome Powell, chair, Federal Reserve Board of Governors
The Federal Reserve Bank of Boston promotes financial stability and inclusion in support of the Federal Reserve System’s dual mandate:
The Boston Fed supports local and regional initiatives that promote financial health in underserved communities. Through research, data tools, and collaboration with community organizations, the Bank helps identify gaps and design solutions that expand economic opportunity.
Survey with Commonwealth:
Why do consumers often turn to costly alternative financial services, such as money orders, retail bill-pay, and payday loans? To find out, the Boston Fed conducted a survey in partnership with Commonwealth, a nonprofit focused on building financial security and opportunity for the financially vulnerable.
Findings revealed that speed, trust, and confirmation of funds are the top drivers of alternative financial services (or AFS) usage. Instant payments can replace expensive AFS transactions and improve financial resilience – if they are designed with low- and moderate-income households in mind.
Many households rely on alternative financial services but would consider other options.
Survey Findings:
Methodology:
This survey, conducted in June 2023, was a convenience sample and is meant to understand what users of alternative financial services products value regarding their experience. The data represents what the respondents to the survey indicated. It is not meant to be representative of the population at large.
