The rise in mobile payments technology and the related pressure being placed on legacy banking systems is threatening the financial stability of millions of people in the U.K. and the U.S., experts say, bank branches and ATM’s begin to pull back from unprofitable areas and retailers increasingly move away from cash.
A report in the U.K. issued a stark warning, saying that if current trends continued in that country, more than eight million people, or 17 percent of the population, would struggle to cope with the lack of cash availability.
The report, called the Access to Cash Review, indicates that working class and low income families as well as residents of more rural areas, are being underserved by a financial system that is moving fast to embrace digital payments, however local merchants are often not equipped to process these transactions and residents have access to fewer and fewer ATM machines.
"There is a perception that older people and those living in rural areas area more reliant on cash, however the biggest indicator to whether you are reliant on cash is income," said a spokesman for the Access to Cash Review. "Those in debt and on low incomes are more reliant on cash than any other group."
He added that the researchers found that people with disabilities, mental health issues, newcomers and vulnerable groups, for example victims of domestic violence are forced to rely on cash as an economic necessity.
The report comes at a time when fintechs are growing at rapid pace in Europe, creating pressure on incumbent banks to streamline their processes,embrace mobile payments technology and develop their own alternatives to the growing number of so-called challenger banks in that market.
"With the decline of cash, there is indeed concern that vulnerable groups get deprived of basis services such as cash dispensers," said Ron Van Wezel, a senior analyst at Aite Group told Mobile Payments Today via email. "The question is if there couldn’t be an alternative approach to the issue."
He noted that maintaining a bank account can cost up to 100 euros annually and people often use cash as a budgeting tool, because they therefore will not spend more than they have available.
U.S. debate
The U.S. is considered well behind the U.K. in terms of moving into digital payments, but recent developments have sparked a major debate over the impact of low income areas and communities of color, were access to credit is limited.
In Philadelphia a measure was signed within the past week to ban cashless retail, which would essentially force customers to only use credit cards, debit or mobile payment devices to buy goods in a store or use certain restaurants.
"With a 26 percent poverty rate in Philadelphia, the mayor believes in equal opportunity for all," said Mike Dunn, a spokesman for the city, via email. "That means we need to sure all residents have full access to banking services that are key to improving their financial health."
He said the city is working on ways to address the problem with iniatives like its Municipal ID program. He noted that the city has to remove obstacles for such vulnerable populations if they lack credit or debit cards, however they do have concerns about the potential to stifle innovation.
In addition, Mercedez Benz Stadium, the home of of the Atlanta Falcons just announced plans to go all cashless, starting with the home opener of their Atlanta United FC soccer franchise starting March 10th.