Solve the unbanked Americans problem at work, not at retail

Engadget today examined the question “Can Amazon Go help the unbanked go digital?” Writer Andrew Tarantola argues passionately that paper currency is on the way out:

As our economy embraces digital transactions while shunning cash, it’s the poor that will be most harmed.

Cash is not in retreat today. There is twice as much U.S. currency in circulation today than ten years ago. The St. Louis Federal Reserve bank tracks currency in circulation (see above). In fact, there is more cash in circulation now than at any time in U.S. history. Moreover, except for the months after the Web Bubble burst in 2000 and post-Financial Crash of 2008, the amount of money in circulation has not decreased at any time since the early 1980s. 

In the on-demand economy, cash transactions remain the primary challenger to home services marketplaces that offer to connect employer and worker. Homejoy, the defunct home cleaning service, for example, battled under-the-table arrangements between its maids and customers. Local maids willing to work for a few bucks less in cash payments often hijacked Homejoy’s national marketing to take the company’s customers away.

The unbanked — people without a bank account or credit cards — represent an important population whose participation in the economy will be someday be limited by digital-only currencies or a ban on cash at stores. We should all be thinking about their access to information, healthcare, or any purchase that is restricted to digital customers as an issue of economic growth and fairness. But cash is doing great. A total transition to digital transactions doesn’t appear to be imminent during the next decade (I could be wrong). As long as cash is accepted, it will be used. That will decide when and how the unbanked face a crisis.

There’s no doubt handling money digitally — in any form, not just the cryptocurrencies — is less expensive for banks and speeds many business processes. But consumers face ever-rising costs for digital banking services.  I imagine that if we asked an unbanked person to pay $2.90 in ATM fees to get $50 or $100 out of their bank that they would laugh at the suckers who cough up such fees. See what they think of the national average ATM fees for non-customer banks, which reached $4.57 in 2017, as an alternative to holding and using cash.

All an Amazon, Apple, Google, or Samsung can do is improve the perceived value of digital alternatives to cash. They cannot force anyone to use their payment systems. 

Treating cash as inherently less useful than digital money is a mistake because the anonymity of cash and the convenience of paying with money rather than by transferring bits remains attractive to ordinary people. We believe digital cash alternatives will rise with the adoption of on-demand work. An on-demand job will more than likely come with a digital payment solution. 

The unbanked consumer does face challenges, as Engadget concludes, pointing to the need to convert cash to use digital services as an inconvenience. The unbanked are also workers, and work is where the opportunity to bring them into the digital economy on fair terms lives. But marketers tend to drift to dreams of retail sales when they think about digital transactions because that is where marketers earn their pay. 

Think work-first to solve the unbanked Americans problem. On-demand companies can drive the adoption of digital payment systems more efficiently than Amazon because jobs pay people. On-demand workers should be studied as a subset of the economy to understand how to introduce digital payment models. Already, Uber, Lyft, and many other marketplaces are shifting to same-day payment via direct deposit or stored value card.

The workplace is where digital payments will rise to change the economy; then retail will benefit from its current investments in digital convenience. In the meantime, cash remains king.

Trust and Fintech: A people problem

Banks offer many more services, along with charging a lot more fees, than a generation ago. As virtual services grow, trust has fallen. Financier Worldwide looks at personalization, GDPR (learn it, know it), and the impact of social media. However, the customer relationship all comes down to trust.

Banks offer many more services, along with charging a lot more fees, than a generation ago. As virtual services grow, trust levels continue to decline. Only 32 percent of Americans trust their bank “a great deal” or “quite a lot,” according to Gallup’s 2017 polling.

Financier Worldwide looks at personalization, GDPR (learn it, know it), and the impact of social media on banking relationships from the Customer Experience (CX) perspective. However, the customer relationship all comes down to trust, which requires human interaction.

“An overwhelming majority of customers consider their banking relationship merely transactional and are seeking better experiences from banks,” suggests Fabrice Albizzati, a partner in EY’s FS advisory practice. “Customers are looking for service providers that know them, that  they can trust and, in turn, stay loyal to. FS institutions, therefore, need to optimise CX and implement a more personalised approach to recapture customer loyalty.”

Notice that customers want the bank to “know them.” Instead, banking and financial service offers bombard the consumer today, by direct mail, email, and SMS. Most of these offers are fishing for potential customers rather than providing targeted services that build trust. They scream indifference to the customer’s daily challenges. The cost to banks is a constant low-yield search for more customers, many of whom trade off between offers over time instead of settling into a relationship and increasing share of wallet with the bank. 

No matter how many technologies we invent, the person-to-person relationship cannot be replaced by pure digital interaction. “Recapturing customer loyalty” is a project that involves the right human interaction blended with digital services to create a sense that the financial company values the customer’s trust and money. Send people to meet people at the right time. Deliver great service and savings to banking customers, and be ready to demonstrate that value in-person, combining listening and empathy with data insights.

People will use technology to reweave trust. It’s a process we are many years into with diminishing returns on technical investments alone. Now, it’s time to help connect in order to rebuild trusting relationships.