Bridging Financial Gaps for Unbanked Residents
August 05, 2024 by Melissa Mayhew
A growing number of people lack access to traditional banking services. Nearly 6 million U.S. households are considered unbanked, meaning they don’t have checking or savings accounts. For agencies committed to providing the best services to all constituents, there are not many more important issues than addressing this gap.
In a recent Government Technology webinar, Daren Jackson, Tyler’s senior vice president of Disbursements, and Joann Henscheid, senior financial specialist at the Idaho Department of Correction, discussed ways modern payment disbursement methods support unbanked and underbanked residents and how governments can leverage these solutions to reduce fraud and secure their transactions.
Understanding the Unbanked
For unbanked individuals, receiving money digitally or by check presents significant challenges. This lack of access to banking services puts them at a considerable disadvantage. Several factors contribute to individuals being unbanked, including previous financial behavior, bank mistrust, privacy concerns, and balance requirement concerns.
“I would like to point out,” Jackson said, “as we’re trying to solve this problem, we’re trying to figure out the why. Why does this problem exist and how do we create solutions that solve the why? The successful way to do that is to understand the population you’re trying to serve. As we build our solutions, we think about those reasons.”
Everyone Wins
Government agencies often rely on traditional methods such as paper checks to disburse funds. Issuing paper checks is costly and time consuming. Uncashed checks require extensive account reconciliation, diverting employee time and productivity. Paper checks lead to frustration among residents, especially the unbanked. This dissatisfaction can result in a lack of trust and confidence in government services.
The primary way government agencies can leverage digital disbursements to serve unbanked residents is through prepaid card issuance. Prepaid cards offer several advantages, including accessibility, cost savings, security, and convenience. By adopting prepaid card disbursements, agencies can better serve a larger percentage of residents.
“The beauty of it is all these technologies are becoming real and they’re all empowerment tools, not just for an agency, but they’re empowerment tools that really benefit the consumer with regards to speed, security, record keeping, convenience, and those types of things,” Jackson explained. “The way we solve the underbanked is to introduce consumer choice.”
Henscheid added, “The win-win is that it’s saved us. It has saved us a lot of time and energy, and it’s also saved the residents a lot of aggravation of trying to get checks cashed.”
Navigating Financial Barriers With the Right Technology Partner
Technology change can be difficult whether you are an agency or a resident. Residents at the Idaho Department of Correction were reluctant to embrace digital disbursements at the beginning, but education is key in implementing modern payment technology.
“At the beginning, they were not happy about it,” Henscheid said. “They thought it was going to be a more difficult thing. But once we educated them on how to use the cards and the fact that they could have their funds that day because they got released, it became an immediate, ‘Oh my gosh, this is a good idea.’”
Embarking on the journey to create financial equity for all residents in your community can feel overwhelming. However, with the right guidance and expertise, government agencies can successfully transition from paper checks to digital disbursements.
Tyler’s team of Disbursements and Card Issuance specialists have helped thousands of government agencies in modernizing their disbursement processes. As industry leaders with deep payments expertise, we offer a comprehensive roadmap to guide your agency from its current state to full implementation of digital disbursements.