ATLANTA — The pandemic has pushed innovations and use of financial technologies forward in months, instead of years. But is the push to go cashless so quick leaving Georgians behind, especially people who don’t use banks?
According to an FDIC survey about 10% of Georgians didn’t use banks at all in 2017. When you break that down by ethnicity, more than 16% of Black Georgians said they’re unbanked, compared to 5% of white surveyors. And when you look at income, more than 20% of people who make 15 to 30 thousand dollars a year say they don’t use banks either. The FDIC found about 30% of Georgians rely on services like payday loans, pawnshops and prepaid cards to supplement their banking needs.
“When I was banking with Wells Fargo it seemed like everything I did, I was penalized for,” explained Yolanda Johnson.
Johnson works in retail, and said she closed her bank account because she couldn’t afford it. She said she was living paycheck to paycheck and overdraft and maintenance fees started adding up. She even tried using prepaid cards, but those have fees too.
“A lot of times I would overdraw without knowing because when you make a purchase and stuff it will say pending, so the money that you see, isn’t the money that you have,” Johnson said.
Now researchers and financial tech companies, or fintech, fear more people who turn away from traditional banks will fall further behind during the pandemic that has already eliminated so many jobs.
“If you think about overdraft fees, payday lending fees, it becomes a snowball that in many instances is not recoverable, and it gets to a point where they just break,” said Steady founder Adam Roseman.
Steady is a fintech company designed to help gig economy workers find jobs, increase income and help with financial literacy. Roseman said many Steady users are low income workers and don’t use traditional banks. Roseman said they’re working to educate folks to keep them from falling further behind during the pandemic, because he’s seen the gig economy workers struggle during the pandemic.
“So that’s something we do with Steady, we have helped people earn more, but then we’ll let them know, hey we see overdraft fees in your account, here’s a way to solve for that challenge right and then you know,” Roseman said.
Consumer researchers are looking for long-term solutions to help at risk workers during the pandemic.
“We know that not only people without a bank account are cash based but some just lower incomes, or, or vulnerable groups or people with volatile incomes prefer to use cash,” explained Jessica Washington with the Federal Reserve Bank in Atlanta. Washington studies consumer payments.
Washington said there is an act in Congress called the Payment Choice Act that would make retail accept cash. If passed it would also ban businesses from charging fees to accept cash, but it exempts online purchases. She fears banning cashless would still leave people behind and the long-term goal should be leveling the banking playing field.
“We realize that in this time of crisis, as digitalization increases rapidly, we don’t want those vulnerable populations to get further left behind, because it’s going to create an exponential problem,” Washington said.
Now fintech companies are innovating to include financially vulnerable populations.
Georgia State graduate Christian Zimmerman said that divide is the reason he created his fintech company Qoins, to help marginalized communities build wealth.
“I’m Latino, my co-founder’s Black, you know we typically see that in our demographics where we lacked the resources and ability to kind of build that financial literacy. And so, we wanted to solve that problem,” Zimmerman said.
It’s an important mission in an economy where cash is no longer king, and consumers are having to learn new systems of non-traditional banking to avoid fees.
“I think that fintech right now, you know really is the way that this is going to be tackled and solved it at least for the most part, but it’s going to take a lot of time to develop that elemental trust,” Zimmerman said.
Yolanda Johnson said one fintech innovator earned her trust.
“If it hadn’t been for Chime, I wouldn’t have been able to put money to the side.” Johnson said she is one of the 8 million people using the mobile banking app Chime. They don’t charge her fees like traditional banks. The money she was spending on fees is life changing.
“With them I’ve been able to take that money and put it into savings, and that I love. We have a savings account for the first time,” Johnson said.
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