Paying for something has never been easier. There’s no need to pull out a bill-fold or credit card nor any need to punch in your PIN and wait for it to verify. You just tap your smartphone and go — it’s just that simple. Except this convenience isn’t as readily available to those who don’t bank with the biggest financial institutions.
Many of those without access to traditional banking services are stuck using old-fashioned payment methods while retailers adopt increasingly digital POS. Luckily, things are changing for these underserved consumers. A growing number of fintech companies are giving the underbanked a means to create their very first mobile wallet.
But first: what is a mobile wallet?
A mobile wallet is a digital platform that digitizes your financial accounts. It’s any app (installed to a smartphone or tablet) that connects your credit and debit cards, storing information so you can make purchases through these apps. It relies on a relatively new technology called Near-Field Communication (NFC), which shares your personal financial information with the retailer’s machines.
Most mobile wallets rely on traditional banking information to carry out these transactions. If not provided by a bank, an app developer usually works alongside banks, so it can communicate online services. Take, for example, Amazon Cash, Google Pay, and Apple Pay. These apps sync with your financial institutions, so you can transfer funds to use on digital payments.
Mobile wallet use is on the rise
According to Business Wire, over half of all US consumers will be using digital payments by 2020. The mobile wallet’s popularity isn’t growing within a vacuum. As retailers see a growing demand for cashless payments, the number of merchants adopting cash-free transactions will rise. Only those who have an appropriate app will be able to frequent these stores.
Already we have Amazon Go, the first-ever, cash-free grocery store. With no cash registers to be found, the store automatically bills its shoppers as they leave with their groceries, using state-of-the-art technology to deduct cash from their Amazon profiles. Starbucks is another huge retailer that’s testing cashless locations. Its cash-free café in Seattle isn’t as extreme as Amazon Go, as it allows debit and credit card payments, but it’s similarly pushing out cash for digital alternatives.
Digital payments discriminate
While these retailers suggest their cash-free experiments will save their customers time and stress, they’re discriminating against those who don’t have access to a mobile wallet. These are the unbanked and underbanked who don’t have the same access to traditional banking services as others.
They may not be able to meet the requirements of a basic account, unable to keep the minimum balance or pay the monthly fees. They may have something in their financial history that disqualifies them from securing other financial services. They may also be suspicious of traditional banking institutions and refuse to do business with them.
Locked out of traditional banking services, this demographic is turning to fintech alternatives for support. They open no-fee savings accounts with a mobile bank. They partner with robo-advisors to make investments. They search for fast payday loans online when they need financial assistance. These online platforms eliminate many of the barriers that can prevent the unbanked and underbanked from accessing financial services, giving them an easy and convenient way to set up online bank accounts, investments, and cash loans.
Though a traditional bank may have had strict requirements that prevented them keeping a checking account or securing an advance loan, fintech sees this demographic as an underrepresented population that needs help. They specifically design their services so that they’re easy and hassle-free for a variety of consumers. More importantly, they’re all online and many use apps to communicate with their customer base.
Their apps offer an alternative way to sync financial information to a mobile wallet, without the need for traditional banks acting as an intermediary. Previously underbanked, this demographic has an opportunity to function within an increasingly cash-free society with fintech.
