Innovation Shouldn't Shut Out Cash Payers
A new digital divide is emerging for the millions of Americans without a bank account or who pay for goods and services with cashand technology will be key to bridging it.
Of course, theres been no shortage of innovation in electronic payments. Services such as Google Wallet, Stripe, Square and Braintree help widen the payment options for consumers and businesses, but they are largely built on top of the credit card networks and offer little for people who dont use credit cards. More and more people are also growing wary of swiping their credit cards after a spate of major security failures at retailers such as Target, Michaels and Neiman-Marcus. At least a third of shoppers reported in a Balance Innovations survey that they will use cash more frequently to pay for goods.
Much of the world of commerce and finance has gone digital at a rapid pace, bringing consumers a range of conveniences, from Internet shopping to check cashing via cell phones. Consumers with access to a credit card, a bank account and a smartphone can largely enjoy that world from anywhere. But for an estimated 60 million people who dont have access to secure financial services in the United States, conveniences like paying for goods and services online, procuring a loan or even obtaining a credit score remain elusive in the digital economy. Whether its because they cant afford the fees associated with banks and credit cards, or because they prefer to protect the privacy and security of their purchases, a massive group of Americans are effectively cut off from technological advances that should include everyone.
But it is not just cash consumers who can find themselves on the wrong side of the dividebusinesses that fail to meet the needs of the cash-preferred population are also missing out on opportunities to increase their market share.
Cash transactions comprise nearly half of all payments in the United States, according to estimates from MasterCard. Many people choose to transact mostly in cash because it gives them greater control over their finances and helps reign in overspending. In fact, one MIT study found that consumers who use a credit card could spend as much as 100 percent more than they would with cash. Still others prefer to pay with cash to avoid discussing discretionary purchases of gifts, shoes or even a fishing rod with a spouse or partner.
No matter what the motivation is, cash shouldnt be any less convenient to use online than offline. And it surely shouldnt be less convenient or more expensive to accept than other forms of payment. Businesses, landlords, utility companies, lenders and other businesses can benefit by moves such as digitally extending their network of cash collection points, which can add convenience for consumers.
Whether it be cash-only payers or the underbanked, consumers shouldnt lose out on the conveniences afforded by the modern digital age. Financial inclusion is advancing with innovative technology offerings like ours and others dedicated to this case, but we need to do more to narrow that technology divide so that businesses and all Americans can benefit.
Danny Shader is CEO of PayNearMe.