The importance of eCash in making payments for essential services more accessible
Sebastian Seifert – SVP Sales & Business Development at Paysafe.
The growing digitalisation of payments is making it more difficult for consumers who rely on cash to pay for essential services, like utilities, healthcare, and even government services. eCash can help to open these up to more consumers, making them more accessible and inclusive, while also reducing costs for the providers themselves.
Back in 2016, a city in northern India, Chandigarh, banned cashfrom the locations where citizens pay their utility bills and property taxes, known as samparkcenters.
This was done with the best of intentions: the initiative was part of the Indian government’s Digital India campaign, a policy aimed at boostingthe country’s digitalisation.
But while digital payment adoption across India has increased, the drive to eliminate cash payments has also highlighted the risks associated with going cashless, and in particular how this can negatively impact the most vulnerable in society.
Over190 million Indiansdon’t have access to a bank account, and for this group of society, not being able to use cash represents extreme challenges in being able to pay for electricity, gas, and other essential services.
Thepenalties involved with paying in cash
Unlike India, some countries are taking steps to protect access to cash rather than banning it, including authorities in the US, EU, and UK.
In the US, a bill currently in front of congress would enshrine consumers’ right to pay in cash into federal law. Several cities, regional authorities, and states have already enacted pro-cash laws.
In the EU and UK, although we haven’t gone so far as legally obliging merchants to accept cash payments, the European Central Bank, the European Commission, and the UK government have all committed to ensuring that consumers will continue to have access to it.
But even if, theoretically, cash payments are protected in the US, EU, and UK, or the need for them to be protected is at least acknowledged – the reality of how this works in practice can be quite different.
Take for example the fact that in the US 76% of healthcare providers prefer receiving payment electronically. Even when they haven’t gone completely cashless, many providers’ payment systems are designed to discourage cash payments.
It’s the same scenario in the UK and EU, where many providers of essential services are either going cashless or making the options to pay in cash less appealing.
In the UK, gas and electricity billscan go up by as much as£100 a yearin fees and charges if you pay in cash. The utility company tariffs that enable you to pay in cash are also typically more expensive, with the cheapest deals only available if you pay by direct debit.
There are also per transaction cash limits in a number of EU countries. In France, for instance, you can’t pay local taxes, fees, or fines in cash if the amount is €300or more.
It’s thanks to these practical restrictions that as many as5.9 million Americans, 13 million Europeans, and 1.3 million Brits who depend on cash find themselves at risk of a deepening cycle of exclusion and hardship.
If you’re living paycheck to paycheck, every cent or penny counts, but when cash payments are accepted, they often have a financial penalty attached. Worse still, cashless payments may prevent them from accessing the critical services they need to improve their lives.
How cash payments can benefit service providers
‘Additional processing costs’ is often the reason cited for an increase in tariffs and fees when it comes to cash payments.
Countries such as Spain that have instituted per transaction cash limits typically argue they’re necessary to prevent fraud, while cashless payments are presented as themore secure, more convenient alternative.
But what this rationale doesn’t take into account is that not accepting cash equally carries risks and increased costs.
Outside of the moral implications surrounding the fact that the most vulnerable in society shouldn’t be excluded because they can’t open a bank account, making it difficult for significant numbers of people to pay for essential services also means lost revenue and higher operational overhead.
Take the US for example. Americans who are on lower incomes and are more heavily reliant on cash are also more likely to have medical debt. So, if American healthcare providers simply made it easier for people to pay in cash, this would surely increase the likelihood of being paid on time and avoid having to resort to expensive debt collection proceedings as often.
The same goes for providers of other utilities and critical services — from utilities, to insurance, rent, and loans. Again, being able to pay for these services with cash can give cash-reliant consumers more flexibility, making it easier for them to pay their bills on time and rendering it unnecessary for providers to take severe and expensive measures as a result, such as cutting access to a service or sending in debt collectors
What’s key is that, unlike digital payments, there’s zero risk of transactions being declined because of a technical issue. We’ve all seen instances where cash provides the fall-back option when other payment methods fail. If anything, cash can make it easier for providers of essential services like utilities and healthcare to get paid on time, even by the customers who are in a position to use cashless payment methods.
How eCash can make essential services more inclusive
There’s no stopping digitalisation, but this doesn’t mean excluding those people for whom cash is critical. eCash provides the best of both worlds for cash-reliant consumers and providers of essential services.
At the point when the consumer wants to make a payment, they can take their bill to a participating payment point, scan the barcode or QR code found on the bill, and hand over the corresponding amount of cash. Whether a consumer is digitally savvy or has a bank account or not, this is simple, straightforward, and convenient.
Furthermore, because the service provider is also notified as soon as the transaction has been made, the consumer can stretch their paycheck for as long as possible without the risk of their account being put in default or an interruption in service, in the case of a utility or phone bill.
Adding eCash to the payments mix is as simple as printing a barcode or QR code onto a bill from a service provider’s perspective.Importantly, there’s also no need to increase the physical footprint, because consumers use the payment points within a network of already established bricks-and-mortar stores. And, because payment is made in cash, there’s no risk of defaults or chargebacks.
If people are left behind, this is not progress
The volume of cashless payments globally is expected to rise by 80% between now and 2025, according to a report from PwC. But while this is unlikely to pose an issue for those of us who prefer to go cashless, we can’t forget about the people who don’t even have this as a viable option.
As the world becomes increasingly cashless, the risks surrounding this will also increase. Being reliant on cash will also become increasingly synonymous with being unable to get healthcare, to light and heat (or cool) your home, and access many of the other services which most of us take for granted.
Furthermore, with millions of people turning to cash to better control their spending in the challenging economic climate, the topic of financial inclusion in the digital age is more pressing and relevant than ever.
It’s through using eCash that hospitals, utility companies, and many other essential service providers can play their part in helping to ensure that the people who are going through challenging times, and need support the most, don’t fall through the cracks.