Defining Households That Are Underserved in Digital Payment Services 
US households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy, but the absence of a common definition of households that are underserved in digital payments makes it difficult if not impossible to collect relevant data consistently and assess the scope of this problem. This paper aims to define households that are underserved in digital payments and define digital payments inclusion.
Key Findings
- The authors define digital payments inclusion as an economic state in which all households have access to and use safe and affordable digital payments for most of their transactions.
- A household has access to digital payments for a transaction if it can use digital payments to complete that transaction. The use of digital payments refers to households’ actual utilization of digital payments for transactions, which may be captured by the share of transactions that the household makes using digital payments.
- A digital payments instrument or service is safe if it meets a particular threshold of safety, and it is affordable if the costs of accessing and using it for transactions is sufficiently low.
- Households that are underserved in digital payments are defined as households that use unsafe or high-cost digital payments or paper-based payment methods for a significant share of their transactions.
- Underserved households are further divided into four groups ranging from those that have no transaction account (the most underserved) to those that have safe, affordable transaction accounts but only occasionally or rarely use digital payment services.
Implications
Existing surveys and studies provide useful insights into households that are underserved in digital payments, but more work is needed to improve how these households are quantified and how barriers to being fully served in digital payments are identified and quantified. The authors identify four possible next steps toward measuring the share of households that are underserved and the extent to which each factor inhibits them from being fully served: (1) review existing surveys and studies, (2) identify data collection tools to fill gaps in data, (3) investigate the potential of administrative data to supplement or validate data collected from individual households, and (4) collaborate with government agencies, consumer advocacy groups, and financial institutions in data collection, measurement, and research efforts.
Abstract
US households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy. Assessing the scope of this problem and addressing it requires a definition of households that are underserved in digital payments. Traditional definitions of households underserved in the banking system—those that are unbanked and those that are underbanked—do not account for the ownership of nonbank transaction accounts that can be used to make and receive digital payments. In this paper, we define households underserved in digital payments by considering four key elements—access, use, safety, and affordability—and discuss how researchers may assess these elements to quantify the share of households underserved in digital payments.