Not everyone ready for cashless pandemic payment options, consumer advocates say

July 20-26, 2020

By Daily Record Staff 

Although many banks and financial institutions are forcing consumers to adopt digital and online payment options during the ongoing pandemic by closing people-run branches and automating most customer service functions, some critics are concerned that many low-income and “unbanked” Americans may be left out in the cold.

As top ecommerce merchants such as Starbucks, Amazon, Apple and others test retail locations that opt out of cash transactions as part of their COVID-19 safety protocols, a newly created coalition of consumer advocates and cash-tied trade groups is now looking to preserve the right of Americans to buy and sell using their hard-earned greenbacks and coins.

That group, the Consumer Choice in Payment Coalition (CCPC), said there has been much misinformation about the possibility of spreading the coronavirus by simply handling currency. 

“Unfortunately, some of this hyperbole about cash safety is little more than a transparent effort by those having vested interests in promoting a migration away from cash to electronic payment methods, which in turn would exclude millions in our population from retail markets,” the coalition said late April as many states began adopting PPE safety and cash handling measures before reopening in early May.

The CCPC has recommended that retailers, consumers and merchants adhere to common-sense when handling coins and currency – or a card or mobile phone. “But at the same time, we believe it is important for the public to be fully and accurately informed, and not misled by unfounded fears surrounding the use of cash versus other payment methods,” the coalition said.

In early May, the CCPC said numerous organizations had signed on as supporters of its mission, including consumer advocacy groups such as the Consumer Federation of America and Consumer Action, which represents manufacturers of cash-handling and processing hardware such as Hyosung USA, Genmega, Triton Systems, and Diebold Nixdorf. Other trade groups allied with the coalition include cash-handling trade groups such as the National ATM Council Inc., the National Armored Car Association, the Independent Armored Car Operators Association, the Secure Cash & Transport Association, The Amusement & Music Operators Association, and Financial Service Centers of America.

The coalition has made as its top priority the passage of the Payment Choice Act of 2019, a bipartisan bill introduced in Congress last year by Rep. Donald Dayne Jr., D-New Jersey. That bill was introduced to the U.S. House of Representatives on May 9 and was immediately referred to the House Finance Services committee where it has been tabled since.

The bill, if enacted into law, would maintain nationwide acceptance of cash payments for consumer purchases of goods and services at brick-and-mortar retail outlets as many merchants move to cashless options. It would also make it unlawful for retailers to refuse to accept U.S. cash for the goods or services, post signs or notices stating that cash payment is unaccepted or charge a higher premium for a customer who pays by cash. 

“We believe it is critical to ensure cash remains a universally available payment option for consumers throughout the nation,” said Linda Sherry, director of San Francisco-based Consumer Action, a consumer justice advocacy group and CCPC member. 

The national coalition also recently issued a statement regarding cash safety during the COVID-19 pandemic and beyond. The statement noted scientific research that cash is as safe to use as other payment methods such as plastic cards or mobile phones – so long as standard public health recommendations about washing hands and not touching one’s face are followed.

Cashless merchants also lock out many millions of unbanked and underbanked Americans, according to Consumer Action, while eroding the fundamental freedom to rely upon cash for payment anywhere in the U.S.

Meanwhile, others note that COVID-19 pandemic has also brought more unbanked and cash users to digital payment apps like Square, Venmo and PayPal via the Coronavirus Aid, Relief and Economic Security Act. Although most Americans’ Economic Impact Payments (EIP) for COVID-19 relief were direct deposited into their bank accounts, the unbanked often had to wait weeks for their stimulus checks to come by regular mail.

In early June, the Treasury Department and the Internal Revenue Service released updated state-by-state figures for EIP deposits showing that nearly 160 million stimulus checks totaling more than $267 billion were distributed to Americans in the first two months after the CARES Act in late March.

Today, the U.S. Treasury said payments have been sent to all eligible Americans for whom the IRS has the necessary information to make a payment. “These payments are an integral part of our commitment to providing much-needed relief to the American people during this unprecedented time,” said U.S. Treasury Secretary Steven Mnuchin. 

In Arkansas, the IRS had sent out 1,506,691 stimulus checks totaling nearly $1.26 billion, which average out to about $836 for each recipient. For unbanked residents in Arkansas and other states who did not get their stimulus payment by direct deposit, the IRS said it sent EIP prepaid debit cards to nearly 4 million Americans who filed a tax return but don’t have bank information on file with the tax agency.

The IRS also open a window of opportunity for Cash App, PayPal, Venmo and other payment app customers with account and routing numbers on file to receive stimulus deposits through May 13. At that time, the IRS closed its “Get My Payment” portal and began issuing paper checks to individuals that did not have direct deposit information on file.

And though there has been no research on the number of Americans who received stimulus payments through such methods, data from Boston-based analytics startup Apptopia shows that cash-enabled apps used for the purpose of sending money to other people saw a dramatic 38.3% spike in May from a year ago.  For this quarterly report, Apptopia looked at 10 top remittance apps, including PayPal, Cash App, Venmo, Western Union, Zelle, TransferWise, Remitly, WorldRemit, Xoom, and MoneyGram.

Yet, research by Visual Objects shows one out of five U.S. small business owners do not offer their customers a digital payment option such as PayPal, Google Pay, Cash App or Apple Pay at check-out. However, as cashless payment options become more popular with shoppers who are nervous about spreading the deadly virus, the report notes, adopting digital payments may be essential to staying in business.

“Those who refuse to adapt to the current situation may get left behind as consumers transition to other businesses that are more responsive to their needs,” said Jennifer Jancosek, principal attorney of a law firm of the same name in Sherman Oaks, Calif., that specializes in estate planning.

In its study, Visual Objects surveyed 500 small business owners to gain insight into which digital payment platforms they are using and the benefits of adopting different options. Here are other key findings from the survey by the B2B research firm.

Reflecting consumer preferences, 81% of small businesses accept some form of digital payment. Conversely, nearly 1 in 5 businesses (19%) do not accept any form of digital payment. This is possibly due to the perceived difficulty of integrating digital payment into their operations.

PayPal is the most popular app (63%) across regions, ages, and company sizes.

Across all company sizes and small business owner ages, Square (32%) is the second-most popular digital payment platform. It boasts a simple interface that appeals to adopters.

Venmo (22%) is a staple for younger small business managers. Its innovative, social media-inspired interface explains its appeal to younger generations.

Small businesses with a mobile app are 18% more likely to accept Apple Pay or Google Pay. Both payment methods are directly connected to smartphone providers, which encourages adoption.

Only 3% of small businesses surveyed accept cryptocurrency. This hesitation can be attributed to the market volatility associated with cryptocurrencies.   

PHOTO CAPTION:  (Photo by Daily Record Staff) 

Bank of America’s remote ATM and banking center in downtown Little Rock allows customers to speak with a teller during via real-time video and gain access to a range of traditional banking services during extended hours. The remote locations also give bankcard access where customers can perform standard ATM transactions on the machines around the clock.