How COVID-19’s ‘cashless’ movement affects underbanked consumers
As the COVID-19 pandemic swept through the United States, many businesses encouraged, and at times, tried to force consumers to pay with credit or debit cards. While contactless payment is encouraged to help limit the spread of the coronavirus, this poses a problem for consumers without a bank account or for those who aren’t eligible for credit due to poor or no credit.
Impact of contactless payments on underbanked consumers
Statistics provided by the U.S. government suggest about 14.1 million U.S. adults are underbanked with many of these consumers not having access to a bank account. The severity of COVID-19 contact spread, coupled with a coin shortage, many retailers are operating with a hard push for electronic payments.
Requiring contactless payment severely limits the ability for millions of consumers to pay since they typically heavily rely upon cash, money orders, payday loans, and other services when managing their finances or making transactions.
States step in to require cash payments
Currently, there are no federal requirements mandating businesses to have to accept cash and coins as payment. During the coronavirus pandemic, some states and local governments have stepped in to force merchants and restaurants to continue to accept cash. Many states already had measures in place to prevent retailers from the ability to refuse cash, while others are starting to implement similar measures to ensure unbanked or underbanked consumers are not discriminated against.
The concern is as demand for digital payments increases, millions of people won’t be able to pay for the necessities they need to live. Lawmakers, along with the support from advocacy and privacy rights groups, have been moving forward with legislation designed to prohibit businesses from refusing to accept cash.
Cash and digital payments don’t have to be ‘mutually exclusive’
According to a recent report published by Mobile Payment Today, a website that provides content about mobile payment projects and technology, a cashless society shouldn’t leave the underbanked behind. The report indicates cash and digital payments don’t have to be “mutually exclusive.”
Experts suggest the solution is “somewhere between a cashless society and our current payment landscape.” Proposals include innovative options utilizing cash-voucher methods and advancing financial inclusion programs designed to enable underbanked consumers to also be able to make contactless payments. While these can prove to be very helpful to some consumers, it also doesn’t resolve their problem of gaining access to credit or being approved with favorable credit terms.
As technology progresses, contactless payments will pose challenges for people who struggle with credit and banking “status.” Traditional credit scores are almost always the primary barrier for consumers. Fortunately, there is another solution in alternative credit scores to help people who are unbanked or underbanked gain access to credit.
At PRBC, we are committed to helping consumers improve their credit scores. If you’re in a situation where you struggle to gain access to credit, we can help. Our alternative credit scoring method helps you build credit as you pay your everyday bills. To learn more about our services, contact us today.