Though speed was certainly a priority earlier this year when the U.S. federal government disbursed billions of dollars in relief funds to more than 127 million Americans (and counting), mishaps and delays raised some eyebrows and had many in the financial services community wondering: What went wrong?
The government's experience in disbursing stimulus funds via paper check and direct deposit offered a chance for those in the digital disbursements technology arena to learn from the government's successes and mistakes, according to Lisa McFarland, executive vice president and chief product officer at Ingo Money.
"It's a monumental task, and a lot to ask of an organization: to execute something along the lines of stimulus checks across the nation," she recently told Karen Webster. "I don't want to pretend it's not a challenging endeavor. That being said, there are many ways the current process could be improved."
As the government gears up for another possible round of stimulus disbursements, McFarland discussed the FinServ community's chance to consider how to best manage multiple, and sometimes contradictory, priorities in digitizing and accelerating the disbursements process. When it comes to promoting a positive end-user experience without compromising security and accuracy, losing balance could mean the difference between successfully connecting the right individuals with the funds they need in real time, or dropping the ball in a very big way.
Speed Vs. Security
There are several key friction points within the federal stimulus initiative that presented an obvious opportunity for improvement. According to McFarland, one of the most glaring was the government's decision to mail out paper checks in cases where direct deposit was unavailable.
Speed is certainly a factor, with paper checks slowing down the movement of funds no matter how quickly they can be printed and sent out, she noted. Yet the use of paper checks also exposed other shortcomings of the initiative.
"The bottom line is, there is no authentication in a check," said McFarland, highlighting the estimated $1.4 billion in federal aid that was reportedly sent to deceased individuals – a costly error that could have been mediated through more effective authentication measures.
There is likely a valid argument for this shortcoming, however. In a scenario like the government's relief aid efforts, the priority is certainly speed, and to place funds with as many individuals as quickly as possible – even at the risk of making a few mistakes. Yet as McFarland explained, the technology exists that can enable entities like the government or insurance providers to provide the speed necessary for a positive end-user experience, without compromising the sophisticated authentication necessary for a secure and accurate experience.
Striking The Balance Through Data
Technological advancements have introduced the opportunity for disbursement facilitators to embed authentication and security within workflows without adding friction for the end-user.
"What's really beginning to emerge in the marketplace to facilitate virtual disbursements is the notion of a digital identity," said McFarland. "That is impressive, but it's also very complicated from a technology perspective."
Bridging the gap between the way an individual is authenticated and the way she or he receives funds is one way to enhance security without compromise. The adoption of biometric authentication through the use of a recipient's smartphone, while disbursing funds to a user's mobile wallet, provides an elevated authentication process as well as an enhanced user experience.
Yet it's one thing for an insurance provider to digitize authentication and disbursement to a familiar customer, and an entirely different thing for an entity like the federal government to disburse billions of dollars in aid to millions of individuals.
At the heart of this challenge is data: An insurance provider likely has high-quality data on an existing customer that they can use to their advantage in the authentication process. Likewise, financial institutions (FIs) faceless friction in disbursing funds to existing consumers or small businesses, thanks to a trove of data at their disposal. This can mean a far easier path to achieving speed, security and a positive user experience.
"There is a little more emphasis placed on the customer experience for businesses in general that want to find a balance between managing risks without being incredibly invasive to the customer," McFarland noted, adding that ensuring an exceptional user experience is often prioritized even at the risk of a few failed or incorrect disbursements.
Technology is advancing to the point where, through seamless integration of user data, disbursements can lower that risk of error even further. Among the biggest barriers to adopting that technology, however, is cost, said McFarland – though industry collaborations and consolidations can promote the creation of more high-quality digital identities that would benefit the disbursement process.
"Technology can solve a lot of the challenges the government faces, and the challenges of disbursements, on such a broad scale," she noted. "Having a digital identity can solve a lot of problems and remove a lot of costs, while also simplifying the user experience – it’s an opportunity to improve the efficiency and delivery of disbursements moving forward."