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Pressing Fast-Forward on Financial Access
Empire Startups Contributor Stephany Kirkpatrick reflects on the challenges of "time to money" while growing up in the family business.
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Growing up, I saw first hand the challenges of “time to money”. My dad arrived in the United States in the early 1950s as a refugee from what was then Yugoslavia. He and his parents came over with almost nothing — certainly not a credit score or high paying jobs in the US.
To earn a living, my parents established a small marina in Portland, OR. From a young age I knew there were challenges in operating a small family run business that was also one of our important sources of income for my family. Even when we were busy, it didn’t necessarily mean we had plenty of money.
My parents would spend days waiting for customers’ payments to clear, so they could write checks to suppliers for payments, which also took days to clear. Then waiting for receivables so they could take care of payables. It was a loop with no end.
Conventional financial advice and systems just didn’t seem to apply to our household’s financial picture — and the more I learned about the American financial system, the more confused I became, which drove me to want to understand and then improve things for my family, myself, and others. I became a Certified Financial Planner™ — in part to help those who struggle navigating the maze of financial advice.
As a bright eyed CFP® I was surprised by the nuance-free conventional wisdom being doled out. Just plunk your money in a high-yield savings account so it can earn more interest. Sure, that sounds good—until you realize that if a family has an emergency and needs money on a Saturday afternoon, it’s going to take 3-5 days to transfer that cash back to a place where it can be accessed.
In the United States, the fact that people don’t get paid for the work they do when they do it has historically compounded inequities. For my family, it meant tough decisions as my parents scaled their business and raised our family. For other families, it often means turning to usury tools like payday loans, which historically impact underserved communities, or being held back by thin credit files, which disproportionately impacts young people or immigrants like my dad.
That fortunately is starting to change. Recent developments – like the introduction of Real-Time Payments (RTP) in 2017 and the Federal Reserve’s FedNow over the summer – enable the clearing and settling of domestic USD payments 24/7/365. With more pathways for shortening “time to money,” people have more options, and the financial system starts to look a lot more inclusive. Here’s how:
Faster access to your own money
I can remember how much of a struggle it was in my household growing up for my family to save money only to then deal with the time delays to get our money out of savings for unexpected expenses. With a small business, running into unexpected expenses is the norm and the unfortunate reality was the only option to access cash quickly was a small ATM with high fees. My story is reflective of what many families go through today – more than half of Americans can’t pay an unexpected $1,000 bill, and almost 4 in 10 adults have less savings than they did a year ago. While the digital transformation of the financial system has made certain parts of the financial ecosystem more accessible than ever before, payments have remained woefully behind. When it comes to accessing money, round-the-clock availability can finally start to bring payments up to speed.
Faster access to your own money
For decades, running payroll has been a multi-day event. With my family’s small business in Portland, the inability to access money for wages played out each winter whenever it snowed. As a kid, snow days were such a highlight; something I’d even pray for. But for my dad, those snow days meant that he and a crew of part-time hires would need to work round the clock to shovel snow off the roof of the covered marina slips. Whenever snow was in the forecast, my dad would stockpile cash so that he’d be able to pay the part-time workers their overtime. Without that cash on hand, he had no way to access his business’ money via traditional payment systems to cover the wages.
That reality no longer needs to exist.
For Americans who work multiple, part-time jobs to make ends meet, a faster option outside of relying on ACH could be a game-changer. The ability to get access to earned wages in real time could make paying rent or utility bills a less stressful event – nearly 20 million Americans are behind on their utility bills. It’s worth noting that despite the existence of RTP, many businesses still rely heavily on ACH for payroll processing. While the shift to real-time wage access may not happen overnight, the prospect of establishing greater consistency in how and when people receive their pay carries significant promise.
Getting a small business loan was incredibly hard for my parents – they were turned away many times before finding a local community bank that would work with them to help secure funds to buy the marina. With steady, on-time payments my parents were able to build more trust with the bank, so when they needed periodic working capital loans there was a willingness to lend again. The problem though was that loans were disbursed via check! Working capital is almost always a short-term need, and often comes on suddenly. So to have to wait for a check to arrive is particularly excruciating.
There were times when vendors who were owed money would come knocking and my parents would have to negotiate to pay them later since the loan we needed hadn’t arrived yet. While this happened to my family more than 20 years ago, not much has changed today. People still have to wait for physical checks to arrive, which can take several business days. In urgent situations, immediate access to funds can provide consumers with much-needed financial relief to address unforeseen expenses without delay. Of course, like any change in the payments ecosystem, it means lenders must adopt FedNow in order for end users to reap the benefits. However, the potential for accelerated lending could be a game changer.
In a financial landscape where traditional wisdom often falls short of addressing the real-time needs of individuals and families, closing the time to money gap is key to creating a more inclusive and responsive financial ecosystem. Achieving widespread adoption of something like FedNow will take time, but it marks an essential step toward a more equitable and responsive financial future for all.
Stephany Kirkpatrick, Founder & CEO of Orum, Empire Startups Contributor
Empire Startups Contributors are a community of experts providing unique perspectives and insights on the latest in FinTech. Our model is is merit-based and does not offer monetary compensation.
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