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Technology, the underbanked, non-traditional finances converge in payment industry

Dec 07, 2012 Dave King

Cutting edge mobile devices, easy access, younger consumers – pick one and there's a reason why the United States is fast moving from paper-based payments activity to electronically-based, mobile payments that can be made anytime from any location. As businesses and individuals make the transition to more ACH cards and prepaid stored value tools as a mainstream mode of payment, they need to be mindful of risks attached to the changing landscape in the payments industry. Those risks are a major concern of the Retail Payments Risk Forum, the research division of the Federal Reserve Bank of Atlanta. By the end of the year, the Atlanta bank will be the sole repository of all paper-based transactions that come through the Fed. The move was facilitated by the Federal Reserve Payments Study that found a growing preference of electronic payments nationwide has caused a significant decline in the use of paper checks. "Payments are quickly migrating from paper to electronic format," Cindy Merritt, the forum's assistant director, told BankInfoSecurity. "We're seeing a lot more activity on the part of telecoms, which are starting to provide services on a prepaid basis via the mobile channel. They are allowing consumers to make payments and have those payments appear on their phone bills." Non-traditional channels
One result of all this cross-fertilization in the payments industry is the broadening of services to people who are considered under and unbanked - those who have little or no connection to traditional banking services. Either because they prefer to rely on stored-value accounts or can't afford the fees associated with traditional banking, the movement to electronic payments by this population through a host of non-traditional financial service providers is undeniable, said Merritt. Recently, the Retail Payments Risk Forum held an Emerging Retail Payments Risk Issues Conference that focused on prepaid options and the impact that globalization and social networks are having on changes in the payments industry. While paying bills and shopping online through mobile devices may be a convenience to the general population, they have particular importance to the 18 percent of individuals who the Federal Deposit Insurance Corporation estimates have little or no banking services, the website reported. "Younger consumers don't necessarily see the need for a traditional banking relationship, and they are also big users of social networks," Merritt said. "We're seeing the confluence of all of these technologies and channels."