In January of 2018, Amazon opened its very first grocery store in Seattle, Washington. There, shoppers can find the veggies and cookies they need just like in any other supermarket. But unlike any grocery store before it, Amazon Go has no cashiers and no cash registers. Don’t book your flight to Seattle just yet; Amazon isn’t giving away free food. The doors are protected by smart turnstiles that charge shoppers’ Amazon profiles for the items they pull from the shelves. Its entirely cashless setup is a convenience for the ultra-busy, who can save time and stress by avoiding the typical lines. But many of the store’s opponents wonder if Amazon is shutting out the unbanked, who rely entirely on cash transactions. That’s where Amazon Cash may assuage critics’ biggest fears, as the e-commerce giant launches an online cash payment option for the unbanked.
Who are the unbanked?
The unbanked are those deemed unprofitable by banks. They often live paycheck to paycheck, which means they won’t carry a significant balance in any of their accounts. They’re also unlikely to invest in other services offered by their bank.
With the bank unwilling to do business with them, the unbanked don’t have checking or savings accounts. And without these accounts, they can’t top up their Amazon or Starbucks accounts using traditional methods. They rely on cash to make purchases, which means they can’t participate in online shopping like most would.
How do they differ from the underbanked?
Though their name sounds similar, there’s a significant difference between these two categories of people. Since they don’t meet the bank’s minimum criteria for its services, the unbanked have no accounts whatsoever. The underbanked have at least one checking or savings account, but they don’t turn to these institutions during financial emergencies. Due to their own prejudices against banks and their processes, they often search out quick and easy loans online when they find themselves short on a bill or repair. Online direct lenders offer a more convenient alternative to traditional banks because they’ve eliminated many of the complexities bogging down the borrowing experience. To the underbanked, these lenders don’t share the same red tape regulating the banks.
What is Amazon Cash?
Launched in the spring of 2017, Amazon Cash is a solution for the unbanked and underbanked locked out of cashless shopping. It’s an updated version of conventional banking that lets people convert their cash into digital currency on their Amazon profiles. They can do this by visiting participating retailers, where they can deposit their cash. Clerks at these stores scan a special Amazon barcode to add this cash on to the right account, so customers can shop online as soon as they leave. The transaction has no fees, making it a cheaper alternative to both gift cards or conventional online banking.
The e-commerce giant partnered with a variety of retailers, including CVS, 7 Eleven, and VG’s Grocery. Every month its conversion services are expanding across the US and Canada.
As Amazon Cash’s presence grows across North America, it promises to help the unbanked and underbanked participate in an increasingly cashless economy. But it’s not entirely without its fault. Amazon Cash isn’t regulated like traditional financial institutions or their cash loan alternatives. It may be a risk the country’s poorest are willing to make. As fintech startups follow in Amazon’s footsteps, the number of mobile services may be the only way the unbanked can access cash-free retailers without being left behind, exchanging bills while the rest of the country taps their cards.