The coronavirus has wreaked havoc in many areas of our lives. Our social, cultural, and economic norms were disrupted in such a way that it will take some effort to take activities back to the level they once were. In the financial sector, for instance, many Americans lost their jobs for one reason or the other leading to the highest number of people applying for unemployment since the recession. To reduce the mounting financial pressure, there have been proposals for stimulus payments to every citizen. However, one of the biggest questions right now is how these consumers will get these payments.
Since the objective here is to get these payments to the most vulnerable in our societies and ensure that everyone gets assistance, disbursement has to be streamlined. With wrangles on the Hill on who will get how much, if a proper distribution technique is not realized, then there will be a lot of problems. A panel discussion with executives from various financial firms said that to make disbursements on such a scale you would need to think past ACH conduits and paper checks which means including and emphasizing digital to get the job done.
The logistics behind it
The biggest challenge behind a stimulus package that’s supposed to reach every citizen in the nation is logistics. The government needs to find a way to get to most people in the most efficient way possible. In the past, stimulus packages have been marred by confusion impropriates meaning families had to wait for weeks to get their checks via snail mail. Getting $2.2 trillion in the hands of families, individuals, and businesses means ironing out the kinks that cause these delays.
One of the biggest challenges in this regard is concerning fraud. There are hundreds of billions of dollars that are supposed to make their way into the bank accounts of about 160 million Americans. As such, getting the cash into all these accounts given that these people are using different banks is not an easy task but there are ways to seal the gap.
Today, most payments from the government usually come in the form of a check. This means is not only expensive to create, but also takes time to reach the intended recipients. As such the debate here comes down to which is more important; speed or accuracy.
Speed vs. Accuracy
According to J.P. Morgan’s Managing Director Industry Head for Public Sector Treasury Services, Wholesale Payments Eva Robinson, there is a need to find the balance between these two aspects to ensure fairness everywhere. This prevents a scenario where some people in a community have received their payments and others haven’t. Although the government still heavily relies on paper checks in matters of disbursement, it’s also important that they partnered with the payments industry to smooth out the process. Although there is still the matter of fraud in regards to checks, they are still regarded as one of the safest ways to deliver money. Since payment options today are much more versatile, it makes sense to leverage theirs already in place anti-fraud mechanisms. This is to ensure that fraudsters don’t hijack these stimulus payments.
Going the digital way is one of the ways that has been presented to Congress as a way to ensure that the rollout is as smooth as possible. If the government is to implement a digital approach, billions of dollars would be saved. It’s generally believed that most people in the US who preferred paper checks are either unbanked or underbanked. This means that they end up going to payroll check services which charge on average 4.11% of the amount to be cashed as fees. In some states, that number goes as high up as 12%. With digital payments, these people wouldn’t have to use these services which leaves them with more money for their various needs.