Is money out of fashion? Not everyone has an app for that.

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As phone apps and electronic banking have seemingly become ubiquitous, many wonder if society really needs cash. The answer is always yes, and it highlights the shrinking but significant number of people who depend on cash to buy – a group that, overwhelmingly, are also facing poverty and other related matters.

All over the world, cashless systems operate in different ways. In Sweden and Norway, some concerns are mounting as banks withdraw liquidity. In Africa, the use of mobile money transfers has exploded. Some researchers credit systems for lifting people out of poverty, although others dispute it or worry about foreclosure fees.

Why we wrote this

The abandonment of cash has accelerated during the pandemic and the effectiveness of electronic payments is hard to doubt. But the trend can pose challenges for millions of Americans who don’t have bank accounts.

Across America, some states have banned businesses from using cash, calling it discriminatory against those who are unbanked. The need, advocates say, is to help these people get bank accounts in the first place.

“Cashless restaurants, cashless services – what first occurred to me was, ‘This was not created with me in mind,” says Wendell Williams, social worker in Washington , DC, who is himself homeless and without a bank account. “The average homeless person, or [who is] poor, is probably not likely to have this stuff available to him.

Cincinnati

When the pandemic hit, Cincinnati restaurateur Jean-François Flechet saw the opportunity he was looking for: finally, it was the right time to ditch cash payments, as well as the time spent counting change and run to the bank that accompanied him. As of May 2020, most of its stores have become cards only.

“It was 100% because of the pandemic. At the time, everyone was disinfecting everything. Cash is dirty to begin with, ”explains Mr. Flechet, owner of a handful of Belgian restaurants. The pandemic-induced cash shortage only made the change more evident. “I’ve wanted to be cashless for a long time, so the pandemic provided one more argument at the time to really flip the switch.”

M. Flechet is not alone. While statistics on which companies in the United States have abandoned cash altogether are scarce, payment processor Square reported that the percentage of payments its customers processed in cash fell a little more. 8 points in 2020, to around 30%, an acceleration of a downtrend the company has seen since 2015. And as businesses of all stripes have adopted a variety of strategies – from contactless payments to online orders to home delivery – to avoid human contact during the health crisis, some companies responded by abandoning cash acceptance altogether.

Why we wrote this

The abandonment of cash has accelerated during the pandemic and the effectiveness of electronic payments is hard to doubt. But the trend can pose challenges for millions of Americans who don’t have bank accounts.

As cards and payment apps become ubiquitous, 95% of Americans likely wouldn’t blink an eye on Mr. Flechet’s cashless establishment. But in our increasingly digital world, there are 5% of often invisible Americans who don’t have a checking account, according to Federal Reserve data. This means that a significant number of Americans face additional disadvantage in their financial lives, which is extremely difficult for this group to begin with.

“Cashless restaurants, cashless services – what initially occurred to me was, ‘This was not created for me,’” says Wendell Williams. Mr. Williams, now a social worker in Washington, DC, has experienced episodes of homelessness, during which he did not always have access to a bank account. Bank accounts come with fees and identity requirements that can be onerous for low-income people and immigrants. “The average homeless person, or [who is] poor, is probably not likely to have this stuff available to him.

The accelerated shift from the pandemic to cash follows a wave of companies that have either abandoned the payment method in recent years or never accepted it in the first place. But opposition to electronic-only payment has been around for decades, long before Square, Apple Pay or COVID-19 were household names. The concerns are now the same as in the 1970s, when Massachusetts banned companies from accepting cash: this discriminates against people without – or with limited access – to bank accounts, including the poor, immigrants. (authorized or not) and people who are homeless. In addition to people without accounts, 16% of Americans are “underbanked”, estimates the Federal Reserve. This group has checking accounts, but still uses services such as payday loans or check cashing services – often due to low incomes, a lack of banks in their neighborhood, or poor transportation. .

Amid the reluctance of some stores to handle money during the pandemic, Massachusetts Attorney General Maura Healey doubled down, Tweeter, “I understand that critical businesses need to take extra precautions now. But not everyone has a credit card, and consumers shouldn’t face economic barriers to accessing needed goods and services. ”

Massachusetts isn’t alone in banning stores from operating cashless. Similar measures have been adopted in recent years in New Jersey and Rhode Island at the state level, and in Philadelphia and San Francisco at the city level.

“Removing the cash option is bad for low-income people, for undocumented people, for privacy, and it generally reduces consumers’ choice and control over their lives,” says Jay Stanley , Senior Policy Analyst at the American Civil Liberties Union. He is quick to point out that credit card data is tracked and sold to advertisers, raising concerns for those concerned about privacy. “To get a credit card or other cashless payment system, you have to get tangled up in bureaucratic banking systems, show ID, prove residency – things a lot of people struggle to do. This often involves a lot of costs which the poor who live an economically difficult existence are unwilling or unable to afford.

Left behind

These questions were on Mr. Flechet’s mind when he made his transition to cashless restaurants. But the problems of the unbanked are not evenly distributed: only a small percentage of Mr. Flechet’s clients have used cash, making it difficult to track, count, change and deposit the day’s winnings. at the bank. But a small percentage for Mr. Flechet translates into a larger number nationwide. In the Bronx, a borough of New York, for example, near 1 of 5 households were recorded as unbanked in 2017. Data from the Federal Deposit Insurance Corp. of 2019 showed that Jackson, Mississippi held a similar rate, at 17%, and in the Houston metro area it was 1 in 10 – but in the Seattle metro area it was below the national average, at 2.6%. The biggest challenge cited with having an account by those surveyed was not being able to meet minimum balance requirements, followed by trust issues, privacy issues, fee and credit issues, and locations and hours of banks.

Advocates say an important solution comes from nonprofits and credit unions specializing in new account holders, ready to take on non-traditional customers. In June, financial technology startup MAJORITY announced that it has raised $ 19 million in funding for its mobile banking system for immigrants and others struggling with the banking bureaucracy.

Mr Williams felt this – even though he was born in the United States

“Fear is the main enemy of any kind of change. And you work on the assumption that you’ve had so many nays, and the doors shut, that you say, “They probably won’t give me a bank account,” he says. He got his first account through a teachers’ credit union that was willing to take it over, after a friend recommended it to him. Without this direct awareness, he doesn’t think this would have happened. Now, as a social worker, part of her job is to track down people with no housing or bank accounts in order to get them the money they deserve, like their federal stimulus checks, many of which are still in circulation and unclaimed.

Mixed results

All over the world, cashless systems operate in different ways and with different outcomes. In Sweden and Norway, where the use of cash has declined in recent years, the financial authorities have actually denounced that their economies are leaning too much towards cashless payments. In Africa, mobile money transfers – which fall somewhere between a bank account, money order, and Venmo – have exploded in recent years. Some researchers credited the systems with lifting people out of poverty, though others have disputed the findings and worried about fees and predatory rates.

Mr. Flechet has decided to allow one of his stores to continue accepting cash, a stand located in Cincinnati’s historic Findlay Market. Although the surrounding neighborhood saw a wave of gentrification, Mr Flechet feared unbanked people in the area might be left out of his business.

“It would be too hard to be without cash” in this place, he said, stressing that his decision to go cashless in other places was not based on dislikes for the homeless or poor. , but rather on a business decision. At Findlay Market, which has a long history of cash venues, refusing money doesn’t make sense: “Sometimes traditions and habits are hard to change. “

It was not far from Findlay Market where Mr. Williams, while not staying and living in Cincinnati, was able to secure a bank account with a local credit union. While a salesperson for the local street newspaper – produced and sold by poor and homeless people in the community – the Communication Workers of America credit union allowed newspaper employees to be paid through internal accounts. With a documented salary, he was able to secure his first apartment.

It was a simple solution, he says, but a powerful one – more powerful than simply banning a company from giving up cash. “Do you see,” he asks, “how can that help improve people’s lives, access to banking services? “


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