America's payments structure isn't ready for mass government stimulus
During unprecedented world economic events, direct government assistance seeks to stabilize the economy. Over the last 100 years, providing these payments to people and businesses was straightforward: mail a check.
Checks still work well, but printing and mailing them takes time. Digital payments, however, don’t yet have the universal acceptance of checks. This creates a conundrum for the government: Choose slower, ubiquitous acceptance or partial acceptance with speed – or a combination of both.
In 2020, as the U.S. government grapples with the coronavirus pandemic, the number of ways people choose to receive payments is actually a barrier. For many, the lack of a banking relationship further exacerbates the challenge.
The emergence of Apple Pay, Square, PayPal, Venmo, CashApp and others has given consumers more options than ever to make and receive payments. But no single one of these tools is used by everybody. Checks remain the only universally accepted form of payment because they are tied to a known physical address. Today, in the era of choice, the country remains unprepared for fast, digital, infrequent or one-time payments from one to many.
What most people do have in common today, digitally speaking, is an email address. Solutions should build on this commonality. A digital payment of this sort could get much closer to ubiquitous acceptance, while providing documentation to the payee and payor. The Deluxe Payment Exchange, for example, sends a digital payment via email that enables the consumer to print a check for deposit, convert the payment into a Visa gift card or transfer to a bank account via ACH. This type of solution gets closer to ubiquitous usability because it gives the payee – even those who are unbanked or underbanked – choices.
The “infrequent payee” problem also impacts small businesses. Many small-business owners do not trust banks, instead preferring “mattress finance” – self-managing their cash and financial needs. Without banking relationships, many of these businesses don’t know how to access the stimulus loan program.
These small-business owners do, however, have digitally enabled relationships with various service providers, including web companies, customer relationship platforms and marketing companies. The government could partner with these service providers to help deliver stimulus payments through digital channels. Through digital payment exchanges, companies like Deluxe, Salesforce and others could distribute stimulus dollars in a matter of minutes.
Until digital solutions achieve ubiquity, the government must use a combination of partners and a mix of digital and traditional channels – including the check. This is the only way to reach everyone. However, by using partners and newer digital payments technologies, the government can accelerate the future of digital payments.
Innovation thrives during times of economic turmoil. Now is the time to leap forward toward digital payments that deliver payee choice and utilize proven, safe distribution channels that meet the needs of consumers and businesses.