Most Americans take for granted the ability to buy goods and services online and offer financial services, including electronic bill payments and person-to-person money transfers. Yet for the 100 million Americans who are either “underbanked” or “underserved” (by current estimates), they lack the capacity to handle these routine transactions.
This population is largely made up of low-income people, immigrants, and people with credit difficulties. These are disproportionately women, people of color and young adults. And those numbers are trending up due to the fallout from COVID-19-related disruptions.
However, being unbanked or underbanked is not simply a matter of income. For many, there are systemic problems with traditional banks that exclude people. The FDIC recently conducted a survey asking unbanked respondents why they didn’t have a checking or savings account. The most common responses included lack of money to maintain an account, lack of trust in banks, privacy issues, high fees, and lack of access to banks in their neighborhood.
Additionally, primarily using cash has actually been referred to as a “second-tier cash economy”, describing individuals unable to pay bills online, or get the best price, or even not be able to find relevant products and services. They face financial exclusion that exacerbates income and wealth gaps and prevents them from fully participating in our country’s economy.
Fortunately, new fintech solutions are helping to disrupt the established services of financial institutions and providing these marginalized consumers with greater access to relevant financial services through mobile devices and a variety of apps. However, many are still left behind without internet access. Even for people with smartphones, many continue to rely on cash in their daily lives because they are uncomfortable or distrustful of technology.
Mom and Dad to the rescue
A potential “new” champion for the unbanked and underbanked may be the unassuming facilities that have existed in their local communities all along: the “mom and pop” convenience store and bodega. These neighborhood outlets are ideally positioned to provide easy access to tens of millions of consumers.
In fact, a recent New York University study conducted in the Bronx showed that 52% of consumers shop at bodegas because they are close to home, and 68% say they shop at bodegas at least once. times a day. As a result, customer trust and familiarity with these establishments runs deep. This contrasts with large chain stores, such as 7-Eleven and Circle-K, which have a rotating roster of anonymous hourly employees who are less familiar to customers.
Neighborhood stores have always offered a range of services to these communities, such as money transfers, bill payment, check cashing, payday loans and more. Many have provided access to even wider ranges of financial services, including phone top-ups and gift cards. Their potential to evolve into true financial or fintech hubs capable of offering an even broader list of products is tremendous, especially given the long-term trust they have earned in their local communities.
The benefits of this market evolution include greater choice, wider financial possibilities and economic freedom.
The future of digital wallet commerce in the corner store
The increase in the number of financial services offered in convenience stores is already driving the “professionalization” of neighborhood store employees as de facto fintech experts and advisors, able to communicate with customers in their local language. This is driving adoption of the latest payment options from Visa debit cards and Amazon Cash to a growing variety of digital and mobile wallets that consumers can add funds to 24/7.
Today, even the newest financial instruments – like New York City’s “OMNY” transit fare payment cards – can be purchased at neighborhood convenience stores. Other companies allow local merchants to offer Bitcoin for purchase with cash or digital wallets. This paves the way for underbanked people to cost-effectively send money to family members in other parts of the world – a popular practice among immigrants – without the average 15% fee.
The trend is clear – the same trusted convenience store that many consumers depend on for their daily staples and lifestyle purchases is also helping to empower the unbanked and underbanked and give them an ever-growing range of financial services. This democratization of fintech offerings is vital not only for these consumers, but for our economy as a whole. Helping them climb the economic ladder is an important movement that our industry must support.