Cashless stores may be good -- for highlighting plight of the unbanked | Editorial
The hardship of being unbanked goes beyond the inability to buy a fancy salad at a cashless store.
Last week, Mayor Jim Kenney signed into law a ban on stores that don’t accept cash as payment. City Council passed the bill over the objection of Amazon, which was planning to open an Amazon Go in the city, a cashier-less and cashless store, as part of a national expansion of the brick-and-mortar prepared-food and grocery store.
Those supporting the ban on cashless stores argue they are discriminatory against poor people who don’t have a checking or savings account, let alone a credit card, and are therefore considered “unbanked.”
While it may be hard to imagine living without a bank account, according to a 2017 survey of the Federal Deposit Insurance Corp., in about 6 percent of Philadelphia households, no member had a bank account — about 35,000 households.
Opponents of the ban argue that it could hinder innovation in the retail sector and prevent businesses that are moving toward a cashless model from opening in Philadelphia, thereby costing the city jobs. Mayor Kenney signed the bill but expressed similar concerns.
City Council and the mayor deserve credit for holding firm against Amazon (which probably felt delicious after the city was passed over for a second headquarters).
Still, the ban on cashless stores doesn’t really address solutions to the actual hardship of being unbanked — which is not the inability to buy a fancy salad at Amazon Go or Sweetgreen (another cashless store). Many of the unbanked can do that, if they wish. A Pew report from 2015 found that almost 1-in-4 unbanked people used a prepaid reloadable debit card that is not affiliated with a bank. As technology improves, there is reason to believe that more and more of the unbanked will be able to access these sorts of noncash payment options.
But a plastic payment option doesn’t equal a bank, and often charges monthly fees and fees for each transaction.
The unbanked lack access to the wide array of financial services, such as savings accounts, credit, and the ability to make deposits and cash checks without excessive fees and with the convenience of mobile services. Too often, those without a bank account turn to such financial products as payday loans, which are expensive and can drive people deeper into debt.
Most people who are unbanked had bank accounts but closed them because they couldn’t afford the minimum balance or got hit with high overdraft fees.
Last year, New Jersey Sen. Cory Booker and Ohio Sen. Sherrod Brown introduced a bill to ban overdraft fees on debit-card transactions and limit other fees.
Philadelphia’s Office Community Empowerment and Opportunity is working with Cities for Financial Empowerment Fund, a national organization working on safe and affordable banking. The city identified four banks that meet the CFEF’s standards, including low minimum deposits to open an account, no deposit fees, free savings account, and no overdraft fees. An awareness campaign for these safe and affordable accounts would help more people learn about these products and perhaps incentivize more banks to offer them.
The city’s ban on cashless stores gives the unbanked an advantage; even better would be an effort to make them banked.