A Rush to Cashless Risks Leaving Many Behind
The World Bank estimates 1.7 billion adults lack bank accounts, meaning they depend on cash to make and receive payments. With some businesses going cashless, Forbes takes a look at the unbanked of America and how they’re being harmed by these policies.
According to a recent survey by the Federal Deposit Insurance Corporation, around 7.1 million U.S. households are unbanked, with minimum balance requirements and an inability to afford fees being cited as key reasons. 23 percent of households with an income below $15,000 annually are unbanked, and the FDIC predicts more Americans will lose their accounts in the coming months as the economic shockwaves of the COVID-19 pandemic are felt.
Fortunately for these people—and others who prefer the privacy and tangibility of cash—82 percent of small businesses still accept cash. Unfortunately, this leaves a sizeable and potentially growing minority who do not, and their doors are effectively closed to those lacking other payment options.
Opponents of the [cashless] movement argue that privacy issues, digital fraud and the marginalizing of unbanked Americans are strong reasons for businesses to keep accepting cash.
Those excluded from making purchases or receiving payments through a lack of traditional banking options may be forced to rely on high-interest products, such as cheque cashing services and payday loans, which tend to further decrease their financial stability.
A twofold approach is needed to support and protect the unbanked. Firstly, there are initiatives such as the Community Development Financial Institutions Fund, established in 1994 to increase economic opportunity in communities underserved by traditional banking services. In particular, they seek to grow the numbers of private banks dedicated to serving low-income areas.
Secondly, laws protecting people’s right to pay with cash have been passed in states including Connecticut, Massachusetts and New Jersey, and municipalities such as New York City, Philadelphia and San Francisco.
The simple step of ensuring cash is universally accepted covers the unbanked, those who distrust banks and non-cash payment methods, people lacking the technological know-how to manage cashless payments, households who use cash to budget… and everyone else who prefers the fundamental reliability of cash.