Federal Reserve Board (“FRB”) Governor Lael Brainard argued that more needs to be done to encourage financial inclusion and to improve access to credit for underserved families and small businesses. She stated that FinTech developments “may be combined in powerful ways to bring end-to-end solutions to financial inclusion.”
In a speech at the FinTech, Financial Inclusion Conference, Ms. Brainard stated that while access to accounts and credit are lowering transaction costs, such developments are not sufficient. She argued that continued progress toward financial inclusion is likely to require solutions that are designed with an understanding of issues that the underserved face (e.g., many unbanked or underbanked people in the U.S. are deliberately choosing not to maintain a bank account). According to Ms. Brainard, access to credit is important in mitigating financial vulnerability.
Ms. Brainard said that policymakers and financial services providers are assessing “financial inclusion” in a more holistic and nuanced manner, with a greater emphasis on “financial health.” In particular, she said that innovative platforms, such as faster payment services, can be combined with other technological developments (e.g., cheap access to cloud computing) to establish a more robust solution to fostering financial inclusion. Ms. Brainard said that the FRB has “a role and, potentially, a responsibility” to help build an “infrastructure that facilitates safe, innovative, and ubiquitous faster payment services.” For those who are struggling financially, she observed, the “difference between waiting for a payment to clear and receiving a payment in real time is not merely an inconvenience; it could tip the balance toward overdraft fees, bounced checks, or collection fees.”