Article

Cashless trend raises concern over the underserved

The rise in cashless payments and the declining presence of bank branches and ATMs is leading to a potential crisis point in many communities across the U.S. and the U.K.

Image courtesy of iStock

March 11, 2019 by David Jones — Editor, Networld Media Group

Editor's Note: An earlier version of this article ran in Mobile Payments Today, a sister publication of Kiosk Marketplace

The rise in mobile payments and the related pressure being placed on legacy banking systems is threatening the financial stability of millions of people in the U.K. and the U.S., experts say, as bank branches and ATMs begin to pull back from unprofitable areas and retailers increasingly move away from cash.

A report in the U.K. issued a stark warning, saying that if current trends continue, more than 8 million people, or 17 percent of the population, would struggle to cope with the lack of cash availability.

The report, called the Access to Cash Review, indicates that working class and low income families as well as residents of more rural areas, are being underserved by a financial system that is moving fast to embrace digital payments. Local merchants are often not equipped to process these transactions and residents have access to fewer and fewer ATMs.

"There is a perception that older people and those living in rural areas are more reliant on cash, however, the biggest indicator to whether you are reliant on cash is income," a spokesman for the Access to Cash Review told Mobile Payments Today via email. "Those in debt and on low incomes are more reliant on cash than any other group."

He added that the researchers found that people with disabilities, mental health issues, newcomers and victims of domestic violence are forced to rely on cash as an economic necessity.

The report comes at a time when fintechs are growing at rapid pace in Europe, creating pressure on banks to streamline their processes,embrace mobile payments technology and develop their own alternatives to the growing number of so-called "challenger" banks in that market.

"With the decline of cash, there is indeed concern that vulnerable groups get deprived of basic services such as cash dispensers," Ron Van Wezel, a senior analyst at Aite Group, told Mobile Payments Today via email. "The question is if there couldn't be an alternative approach to the issue."

He noted that maintaining a bank account can cost up to 100 euros annually, and people often use cash as a budgeting tool so they do not spend more than they have.

Debate hits the U.S.

The U.S. is considered well behind the U.K. in terms of moving into digital payments, but recent developments have sparked a debate over the impact of low income areas and communities of color, where access to credit is limited.

In Philadelphia, a measure was signed within the past week to ban cashless retail, which would essentially force customers to only use credit cards, debit cards or mobile payment devices to buy goods in a store or use at certain restaurants.

"With a 26 percent poverty rate in Philadelphia, the mayor believes in equal opportunity for all," said Mike Dunn, a spokesman for the city, via email. "That means we need to ensure all residents have full access to banking services that are key to improving their financial health."

Dunn said the city is working on ways to address the problem with initiatives like its Municipal ID program. He said the city has to remove obstacles for such vulnerable populations if they lack credit or debit cards, even though they don't want to stifle innovation.

In addition, Mercedez Benz Stadium, the home of of the Atlanta Falcons, just announced plans to go all cashless, starting with the home opener of their Atlanta United FC soccer franchise on March 10.

About David Jones

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David Jones is the editor of Mobile Payments Today. He is a veteran business and technology journalist, with three decades of experience writing about business travel, real estate and technology.

Since 2015 he covered a range of technology stories for the ECT News Network, which includes the E-Commerce Times, TechNewsWorld, LinuxInsider and CRM Buyer, writing about cybersecurity, artificial intelligence, machine learning, open source computing and privacy issues among others. He recently covered FinTech issues for PYMNTS.com.

He worked as a staff writer for Bloomberg Business News and an online reporter for Crain’s New York Business. He has written for numerous media organizations, including Reuters, The New York Times, The Real Deal, Continental, City Limits and The Nation. 

He was previously awarded the George Washington Williams Fellowship for Journalists of Color by the Independent Press Association.