Services like PayNearMe for unbanked consumers expanding

Check cashing store

Services for people without bank accounts are expanding. Photo Credit: diaper/Flickr.com/CC-BY

There is a class of people called “unbanked” who do not get a lot of media attention. The unbanked are people who have no bank account of any kind. The number of services catering to them, such as the payment management system PayNearMe, is growing.

Payment system and convenience chain form partnership

There is a new payment management system called PayNearMe that has formed a strategic partnership with 7-Eleven convenience store chain, according to BusinessWeek, that aims to serve a group of people referred to as the “unbanked” in the economic literature. The unbanked are people with no transaction account, such as a checking or savings account or debit card. PayNearMe founder Danny Shader recognized a need for these people to be able to conduct transactions, which led to him starting the company. Customers feed cash into a kiosks located in 7-Eleven locations in order to complete electronic financial transactions.

Growing number of services

PayNearMe currently can be used for such functions as shopping online or paying bills, and it costs less than getting a money order through similar services such as Western Union. The unbanked are able to secure financial services a lot easier these days, as more companies are offering products for them. Prepaid debit cards, for instance, are easily obtainable and can be used in lieu of a traditional bank account. As of January of this year, Kmart was rolling out a retail banking program at its stores, according to the Los Angeles Times, that offers services like check cashing and bill paying. Walmart already has financial service centers in 40 percent of Walmart Supercenter stores that have similar services available for unbanked and underbanked consumers. Walmart financial service centers charge far less than traditional check cashers.

A quarter of Americans do not rely totally on banks

A sizeable minority of Americans don’t rely totally on banks or credit unions to handle their financial transactions or services. The unbanked, those with no transaction accounts at all, are estimated to make up nearly 8 percent of the population, according to Forbes, about 9 million people as of 2009. A further 21 million, or about 18 percent of Americans, are defined as “underbanked,” in that they have a bank account but have to rely on alternative financial service providers, or AFSPs, to make some of their transactions for them, according to the FDIC. Nearly 47 percent of unbanked households have never had a bank account and about 41 percent said in an FDIC survey that they never intended to do so. The most common reason among the unbanked for not having a bank account was not having enough money to warrant opening a bank account.

Sources

BusinessWeek

Los Angeles Times

Forbes

Federal Deposit Insurance Corporation

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