Introduction
The Brookings Institution, a nonprofit public policy organization, recently published a report entitled “Debunking the narratives about cryptocurrency and financial inclusion.” The report analyzes the claim that the development and adoption of cryptocurrencies can increase financial inclusion of the unbanked, underbanked, and minority populations, including Black, Latino, and Hispanic communities. The report’s author, Tontantzin Carmona, suggests that popular claims of cryptocurrency increasing financial inclusion of these populations may be exaggerated at best, or completely false. 
 
Financial Inclusion Claims of Crypto Proponents 
Carmona begins her report by reviewing the two most widespread narratives about financial inclusion related to crypto. The first narrative she discusses is that cryptocurrencies will provide easy access to financial services and will offer the unbanked and underbanked a mechanism for making financial transactions. This narrative suggests that the main reason unbanked households have difficulty accessing banking services is because they live far from a bank, the bank is open at inconvenient hours, or they lack the ability to use digital payment options. It also suggests that crypto be used as a currency spent on everyday goods and services. The second narrative that Carmona discusses is that cryptocurrency can, and should, be viewed as long-term, buy-and-hold investment that Black, Latino, and Hispanic individuals and households can use as they seek upward economic and financial mobility, rather than as a currency used for everyday goods and services. 
 
Carmona notes the dichotomy of these competing objectives and the conflict it creates. Either cryptocurrency should be treated similar to traditional currency and transacted on a daily basis, or households should treat cryptocurrency as a long-term investment. Cryptocurrency held by an unbanked, underbanked, or minority household cannot accomplish both objectives simultaneously. Thus, it is not clear which financial inclusion problem cryptocurrency is trying to solve. 
 
Can Crypto Help the Unbanked?
As for the claim that cryptocurrency should be considered a tool for unbanked, Carmona rightly points out something that users of crypto already know — most crypto platforms and exchanges require a linked bank account to fund the crypto account and initial purchases of cryptocurrency. Moreover, due to the notoriously volatile nature of cryptocurrencies, their price fluctuations make them unsuitable and unreliable as a means of everyday payment. Thus, regardless of the utility of cryptocurrency stored on cryptocurrency exchanges and platforms, consumers will almost certainly also require an account at a traditional financial institution holding U.S. dollars. 
 
Carmona points out that what vulnerable populations really need is access to a fast, secure, and convenient payment system, and that crypto proponents’ solution—, stablecoins — is also ill-suited for this purpose. Presently, stablecoins’ primary purpose is the facilitation of trading, lending, and borrowing of other digital assets within the crypto ecosystem, rather than outside of it. Regardless of the potential utility of stablecoins to facilitate payments in the future, like other cryptocurrencies, the purchase and exchange of stablecoins requires a cryptocurrency exchange, which in turn almost always requires the linking of a traditional bank account holding U.S. dollars. Thus, the utility of stablecoins for the unbanked is mitigated by the requirements of the stablecoins themselves. 
 
Is Crypto a Wealth-Building Tool?
The second narrative that Carmona tackles in her report is that of cryptocurrency as a wealth-building tool. One only needs to read the news to understand the problem with encouraging minority populations to buy-and-hold cryptocurrency to increase their wealth and financial mobility. In spite of years of investment and development poured into crypto, it has never developed beyond a speculative asset. Cryptocurrencies have no intrinsic value and are not backed by anything; they derive their value simply from other investors and potential investors believing they are good investments.  If that changes, the value can drop to nothing. This is particularly risky for lower-income, vulnerable populations who may invest a greater proportion of what wealth they do have into speculative cryptocurrency investments. 
 
CoinJournal recently reported that since 2014, 316 cryptocurrency exchanges have failed and, most shockingly, 42% of those failed exchanged vanished without a trace, taking accountholder funds with them. Notable examples of failed exchanges include Celsius, Three Arrows Capital, Voyager Digital, and most recently FTX. Between $1 and $2 billion of client funds is missing at FTX alone, spanning from retail investors to the Ontario Teachers’ Pension Fund, who had invested $95 billion in FTX. There is no doubt that vulnerable populations, such as low- middle-income retail investors and minorities are among the victims of FTX’s dramatic failure. 
 
Statements from Policymakers 
Given the increased attention that cryptocurrency is receiving on Capitol Hill, it should be no surprise that policymakers are making statements about the purported benefits of cryptocurrency in increasing financial inclusion for underbanked and unbanked populations. What is interesting however, is the different opinions, even among members of the same party, on the effectiveness of cryptocurrency related to financial inclusion. Sen. Cory Booker (D-NJ), well-known for his support of cryptocurrency, stated at the 2022 DC Blockchain Summit that “people of color look at big financial institutions for what their history shows them to be: discriminating against vulnerable communities.  It’s no surprise the African Americans and Latinos are turning to a world that is a decentralized world, that they hope will be a more level playing field.”
 
On the other side of the spectrum, Sen. Sherrod Brown (D-OH), Chairman of the Senate Banking Committee, stated during a hearing on cryptocurrency that “crypto doesn’t actually function as real currency in any traditional sense. Allowing more people to trap their money in risky, speculative investments isn’t the kind of financial inclusion we need. It’s not going to do anything to help Americans working hourly jobs who don’t put their paychecks in the bank because of abusive fees.” It is clear from these opposing statements that even members of the same political party disagree on the financial inclusion benefits of cryptocurrency. The question is which opinion holds more weight among vulnerable populations?
 
Recommendations
Carmona recommends that regulators view crypto’s purported benefits as similar to those of other alternative financial services that attempt to the fill gaps left by traditional financial services, such as payday lending, check cashing services, and remittance services. She adds that regulators should also implement baseline consumer protections that provide the same level of consumer protections that an account holder would receive at a bank or other traditional financial institution.  
 
Other recommendations that Carmona presents in her study are (1) the agency that oversees cryptocurrency should have an explicit investor protection mandate and significant resources to monitor the industry, (2) financial literacy materials should prioritize transparency and accountability, (3) crypto companies should be required to disclose the gender and racial diversity data of their workforce and board members, and (4) government officials should be asked, if not required, to refrain from making misleading claims regarding crypto and financial inclusion. 
 
Carmona closes her report by outlining more direct and impactful ways that financial inclusion can be addressed rather than the use of cryptocurrencies, like real-time payments solutions such as FedNow, direct checking accounts and transaction services through the post office, and requiring financial institutions to offer basic, no- or low-cost bank accounts.
 
Closing
Regardless of the potential utility of cryptocurrency to the financial system as a whole, one thing is clear, claims made by crypto’s proponents of the importance of cryptocurrency as a tool to increase financial inclusion are misleading, even dangerous, to vulnerable populations who may invest in cryptocurrency either as a tool for everyday transactions, or as a long-term investment. 
 
While further development and implementation of crypto- and blockchain-based financial products are likely, and there very well may be valid business-related reasons for bank- and non-bank financial service providers to offer these products, members of the Innovative Payments Association should reconsider financial inclusion as a reasonable justification for their investment and development of such products. 

What is your company’s role in the payments industry (program manager, issuer, processor, service provider, etc.)?
APS is a Service & solution Provider. 

Our mission is to empower safe, secure, and frictionless payments for EVERYONE. At APS we understand that while it may be a bank or FinTech that is our direct customer, it is the consumer (a college student applying for a new account, a consumer paying for groceries on a card, or an independent business owner disputing a charge) that we impact. We want to ensure that everyone has an opportunity to access payments safely, securely, and in an efficient manner when it is their money that needs to be accessed.   
 
What kinds of payments do you support?
Our direct customers that are using our Advantage Platform include Banks, FinTechs, Card Programs, and Processors. APS’ “Advantage Solutions” is a configurable cloud-based suite of regulatory technology applications which span the payment lifecycle from client onboarding to dispute and fraud management. Through one integrated platform we offer KYC through our ID Advantage application, OFAC monitoring with Watchlist Advantage, Dispute case management through Dispute Advantage, and with Advantage Risk Management we offer transaction monitoring with case management & SAR filing. 
 
What kinds of special features do your products and services offer?
APS’ Advantage Solutions suite of regulatory technologies being all in one platform is very rare in the industry. In addition, it was built native in the Microsoft Azure cloud. 
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We have optimized our applications with workflow automation, predictive analytics, and AI (artificial intelligence). Our Dispute and Advantage Risk Management Cloud Based solutions are optimized throughout by enabling workflow automations whenever possible. Enabling workflow automations empowers employee efficiencies by allowing technology to handle repeatable tasks, leaving critical responsibilities for skilled employees. Creating opportunities to uplevel current talent, not have to hire additional talent, minimize risk by streamlining operations, and ultimately saving organizations time and money. 
In addition, we have been innovating with cutting edge AI technology to mitigate fraud in the payments industry. One of the inhibitors in the payments industry is fraud. At APS we are working to ensure that money is safe and secure. We are transforming the way fraud is monitored and managed, providing a more secure payment processing industry.
 
What kinds of companies are you looking to partner with?
We are looking to partner with FinTechs, Banks and BAAS providers. In addition, we are looking to partner with organizations that want to mitigate fraud in the industry as we believe it will take all of us collectively to make an impact. 
 
What do you think the future of payments holds in the next five years?
From a technology standpoint we think we will see continued trends around machine learning, AI, Big Data, Cloud Computing, and QR code Payments & Mobile Apps. 
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As it relates to business and operations, we think we will continue to see consolidation. An increase in new fraud trends. An increase in a need for automations, accelerated timelines to achieve regulatory requirement timelines, and more regulatory evolution or changes for FinTechs .

Answers provided by Kathy Clark, SVP Operational Excellence, Ubiquity ​

What is your company’s role in the payments industry (program manager, issuer, processor, service provider, etc.)?
​Ubiquity helps payments industry innovators and disruptors deliver world-class customer experience through multichannel contact centers, but a significant portion of our business is devoted to managing what we call banking operations. That includes manual IDV, OFAC watchlisting screening, client or customer due diligence, fraud investigations, as well as dispute and chargeback management. For the latter, we customize our approach by client in a way that minimizes friction for their customers while also protecting their business from compliance and fraud risk. We’re proud to be achieving a 99% or higher compliance rate across millions of touchpoints a month, which has helped us become the provider of choice for many issuing banks, processors, and digital banking challengers. Our leadership team grew up in managed services for prepaid and emerging payments. That experience really fueled the formation of Ubiquity, which was founded 10 years ago on the firm belief that our clients and their customers deserve better than what has been traditionally offered from business process outsourcing relationships.    

What kinds of payment companies do you support?
It really runs the gamut from prepaid pioneers to Banking-as-a-Service innovators to crypto cards to more traditional brands that are embracing embedded finance solutions. We understand what it takes not only to provide amazing service to cardholders who are nervous about their balance or a suspicious transaction, but we also specialize in reducing costs per cardholder and mitigating fraud losses. In the current economic environment where everything costs more, fraud (first-party and third-party) is on the rise, fintech funding is at its lowest levels since 2020, and hiring is extremely difficult, we come in to provide optimized customer experience and banking operations that help brands achieve profitability and set them up for long-term success. 

What kinds of special features do your products and services offer?
While we absolutely have technology solutions to optimize CX and performance management, we’re fundamentally a people business. That means we devote a lot of time and resources into employee experience. We know that when employees are empowered to do their best work–and rewarded for it–that translates to better experiences for our clients and their customers.

We’ve built and nurtured strong teams of subject matter experts that can really consult with our clients at the onset of a relationship but also in an ongoing capacity. We’re always looking for ways to do things better, and we know that in payments and fintech, our clients have to be able to adapt to changes from customers, competitors, and even regulators.

On the technology front, everything we do is about helping customers self-serve or making it easier for agents to do their jobs well. For example, we offer IVR design and optimization, a performance management platform specifically created for the contact center environment, and we incubated an artificial intelligence technology that serves as a “digital assistant” to agents while they work, prompting the next best action based on trigger words during a conversation. The AI technology has helped reduce average handle time but also minimize regulatory complaints, which our digital banking clients appreciate.

Most recently we’ve begun testing a proprietary dispute management tool, which we’ll be rolling out in Q1 2023. The tool is designed to make it easier for dispute analysts to speed up their investigation process by automating tasks and auto-populating certain fields to reduce errors, while ensuring there’s a clear audit trail, and greater visibility for clients into performance and productivity. With fraud and fraudulent disputes on the rise, we’re excited to have a more sophisticated platform for managing this sensitive work. And it was also important for us to build something that was easy to integrate with our clients tools and systems and that has enough flexibility to customize capabilities and reporting. 

What kinds of companies are you looking to partner with?
Any company that puts a premium on CX, security, and compliance. None of those things should be mutually exclusive. I know everyone is tired of talking about the pandemic, but the truth is that it put into sharp relief the need for banks and digital challengers to level up their customer service. And even tech companies that have largely tried to eliminate phone conversations are coming around to the fact that there are times when customers want to talk to a person to resolve their issue–they don’t want to wade through a knowledgebase or suffer through an endless litany of choices that don’t fit their needs, or talk to a chatbot that can’t make heads or tails of their request. We see the best CX as harnessing the strengths of technology–automation, productivity, self-service–and combining it with the creativity, problem-solving, and empathy of human agents.

What do you think the future of payments holds in the next five years?
Even though we’re facing a difficult economic and funding environment right now, payments and fintech will continue to thrive as long as companies can prioritize CX and actually achieve profitability. We know that the demand for innovative financial products that help consumers get ahead has never been more pronounced, and the lines will continue to blur between financial and non-financial brands and where consumers will feel comfortable getting those services. We’re excited about what the future holds because we know that brands will find new ways to differentiate themselves through exceptional CX.  

To learn more, visit ubiquity.com.