For The Unbanked, Cash Is King
In the immortal words of the late, great Ray Charles:
That old sayin’ them that’s got are them that gets
Is somethin’ I can’t see
If ya gotta have somethin’
Before you can get somethin’
How do ya get your first is still a mystery to me
That tune went through my head this morning as I read the results of a great study by Tufts University that tries to ascertain the cost of using cash as a means of exchange. Among its major conclusions:
- Financial access matters. The price for basic cash transactions depends greatly on whether individuals have a bank account. In general, the prices for basic cash out transactions are systematically higher for the unbanked than for the typical consumer. For example, for every 20% increase in income the cost of accessing cash decreases by about $0.65.
- Even controlling for income and education, the unbanked are less likely to see cash as risky than are those with access to bank accounts.
- Surprisingly, cash habits vary widely by gender. And women are much less likely to feel a need to have cash in their wallet compared to men.
- Demographics matter. African-Americans report a greater need to keep cash on hand than other racial groups.
- Finally, consumers are slow to change their banking habits even as their income rises. This seems to me to suggest that as the number of young people getting through life without opening up a traditional account increases, so too will the need for financial institutions to offer less traditional account products, such as prepaid cards. In other words, this isn’t going to go away with age.
Our friendly regulators at the NCUA had their September board meeting and unless you were planning on buying some new property with an eye toward expansion, or want to open up trusts to facilitate your credit union’s charitable giving, there is nothing the NCUA did yesterday that should keep you up at night. On that note, enjoy your weekend and let’s hope that the Giants have more touchdowns than turnovers.