I think many people here are missing the (probable) point of this. If you're wondering "who could use such a service?" - then this service probably isn't for you.
7% of US households are unbanked, and 20% are underbanked(1).
Many people are paid in cash, or simply cash their checks at Walmart or a check cashing place. The money never touches a bank account, and they don't have a credit card.
Paying for things with cash in similar ways is actually pretty common in other countries. When booking an airline ticket in Indonesia, I was surprised that there wasn't even an option for credit card payment - after clicking "purchase", it gave me a code and said to go to the 7/11 equivalent (which might have even been 7/11), give the counter my code and cash for the ticket.
First job I had out of college, when it came to payday, my boss handed me a paycheck with pay stub and I folded it up and put it in my pocket. He told me that I was supposed to sign the check and hand it back to him, and then he'd pay me cash for the face value of the check.
He seemed incredulous that I didn't know that immediately; he asked me if I was a trust fund kid and if this was my first job. I told him, a little defensively, that I had held several jobs previously and most of them just used direct deposit.
Apparently all of his other employees had just been taking their paychecks to a check-cashing place, and paying a fee to get cash. If he gave them cash, then they could save the fee on their end and he didn't actually have to keep money in the bank account that handled payroll, which I guess saved him some fees on his end as well.
I definitely asked some pointed questions to figure out if it was a tax dodge, though; it was kind of a sketchy business.
I can understand a variety of cash usages over credit for fee savings, privacy and getting around transaction limits. But I can't understand why anyone would use a check cashing place. Can you not get a bank account for free in the US? Even my grocery store runs a free banking service here with no minimum - you lose out on some things like teller withdrawal, but they have ATMs everywhere and unlimited debit transactions.
Many of the major banks charge fees if your bank account is below a certain threshold [0], often in the range [$1000,1500] for the required minimum balance. Any balance below that, you typically need direct deposit to avoid the fees.
And banks have a (in the US) deservedly poor reputation amongst the poor.
Less common now (maybe barred now?), banks would take the day's transactions and apply them in an order which deliberately fucked the customers. Let's say your balance is $100, and you get paid $1500 today. But you're living paycheck to paycheck so you delayed bill payments until today. You pay 5 bills, total value of $1000 (you have enough, technically). The banks would order the execution of those transactions to hit you with overage fees for as many of the payments as possible. If you noticed it right away, they'd refund the money with a phone call (and a few hours of your time on hold). Otherwise, you're just out a couple hundred dollars. All your bills will have been paid, but you would have been hit with up to five $25-75 overdraft fees before your deposit was finally processed.
Or how Wells Fargo was creating accounts for people without their consent, resulting in people who had enough money in their accounts suddenly not and being hit with fees and penalties for their trouble.
[0] They'll also change these in the fine print periodically. My free checking was a $1000 minimum with Bank of America. I'd switched to USAA for most things, but they have no physical branches. Occasionally needing a real bank, I left the $1000 in my BoA account, then one month I got hit with a fee. Turned out they'd bumped the minimum to $1500, found the letter and it was indeed small print indicating the change to the small print, buried in 10 or so pages of material about my account.
It's worse than you think for those with low balances.
Gas stations and some other companies 'susceptible to fraud' Have the ability to withdraw cash before the whole bill goes through. So the swipe has $70 withdrawn, then redeposit it (with a long delay), and then charge your bill. So you end up with multiple overcharges for one transaction if the first withdrawal is too large.
Account features like paying/auto-transfer from savings being disabled if you trigger arbitrary rules.
Normal banks and even most credit unions are purposefully exclusive in policy. Though I imagine a lot of it is "this is just how it's done" than purposeful. Though it does all feel pretty hateful after banking at military banks, since there is a working model right there.
I forgot about the gas station issue, also happens with hotels and rental cars. It's not technically a withdrawal, the money stays there, but it is a hold on your money preventing you from spending it which will cause the overdraft fees when you spend money you think you have (and technically you do) but can't spend because it's been held for a week by a gas station. At times I've tried to go all debit card for spending (as a way to kind of "reset" myself when I've let my spending get out of hand). But gas stations will always go on my CC because of this issue. Local ones here put a $99 hold on my cards, typically, and they usually stay on there for 3-5 days.
> Can you not get a bank account for free in the US?
If you have good credit (which usually requires a well documented reliable income, and no outstanding unmaintained debt from say, a college education or medical condition), if have the $20 or so to spend to keep the account open and in good standing, if you have the time and patience to make sure you never accidentally overdraw or under-use (so as not to get hit with costly fees).
Then sure, a bank account is "free" in the US.
If any of the above doesn't apply to you, then you might have some troubles. And there are a lot of businesses that exist to take advantage of (typically poor) people who have had troubles with real banks.
I've never had a credit check for a checking account. They used to do these a long time back (and it was totally reasonable), but they don't really anymore.
Yes, account maintenance fees are lame, but there are banks that don't have these. They've only recently become widespread for your typical checking account. Banks are getting more aggressive since the myth that using banks somehow benefits the customer is dead (they no longer pay interest, and mostly just laugh when you complain).
For the other things, yes, if you want use your bank account to pay, you have to make sure it has money in it. Is that some sort of problem? Do you expect a bank account to be a license for free money, or this to just automatically handle itself? I don't get it. You say people want bank accounts but can't get them because they don't have the "time and patience" to manage them? Isn't that a good reason not to give them to them?
We do, in fact, have strict banking regulations and a federally-backed insurance program to protect depositors in mismanaged institutions.
I guess the point is that people always paint the U.S. as if it's some wasteland where we kick the teeth of everyone with a net worth < $1M. That's not the case. On further inspection, as in this thread, you'll find that many (though not all) such complaints are someone attempting to craft a sob story out of the fact that we don't live in a rainbow world where bank accounts magically fill themselves up.
There's a separate, parallel system of checking checks. My credit is in very good shape, but there's a company out there that thinks somebody with my name passed a bad check in a state where I don't reside on a bank account that was no longer open when the transaction was made--indeed, the bank itself no longer existed at the time.
I found this out when I went to try to open a joint account with a business partner and got denied. We ended up opening the account at an institution which I already used, instead.
I know that credit unions (and banks, for that matter) in my area don't require a high credit score to open an account - I was able to open two accounts - one in a credit union, another one in a bank - while having no credit score whatsoever after arriving to the country. The bank did actually run a credit check on me, and they told be that it basically came up as "no history", which to them is the same as not passed... but they didn't care, so long as I didn't ask them for a credit card.
The bank referenced above (the one that I was able to open an account for despite not having any credit history) is actually Wells Fargo. Although unlike the credit union, they do have minimum account balance (or account fees).
Anyway, getting back to the original question - if credit unions are indeed much more flexible wrt opening accounts, and not require account fees, why are there so many people without accounts? Is it because some areas simply don't have credit unions?
if you overdraft your account and owe the bank money or write/cash bad checks you get blackballed by the banks and your name gets put in the chexsystems that all banks use until you pay back the bank you owe. No bank not even a credit union will allow you to open an account until you get your name removed from chexsystems. Many poor people just give up knowing they will never be able to pay off that debt and go without a bank account
The employer was taking the check back immediately in exchange for cash. He may never have cashed those checks, but used a different check or transfer mechanism to repay himself (or the cash could've been the company's to begin with). Handing the checks to the employees, as part of a tax dodge, could've been just enough action to appear legitimate to the people working for him, but the trail could easily end with him since all he had to do was burn those checks afterwards.
Or you'd dummy up some pay stubs and fake checks that no bank would ever cash, then make your employees give the paychecks back to you immediately and pay them face value for their paycheck in cash.
This is a huge deal for places like India, Pakistan, Nepal and Bangladesh where the vast majority of people do not have a bank account from which they can get a Visa or Mastercard. Probably 85%+ of the population. Those who do have basic bank accounts (we're talking about the bulk of the population whose monthly salary is less than the local currency equivalent of $400 USD) can't get credit cards or are unwilling/unable to jump through the hoops necessary to do so.
BTW, Amazon India has had cash on delivery since ~2013 (except a time during their recent currency crisis). This is arguably more user-friendly than Amazon Cash.
ECommerce is booming in Pakistan and almost all of it is on CoD. For those who have bank accounts, ATM cards usually double as debit cards. For those who are out of banking networks, telecom operators are offering branchless banking to mobile users across Pakistan.
I can't help but think that there's an insidiousness behind the push to treat banking as if it's some a life fundamental.
Banks are surely convenient, but they come with tradeoffs. It's plausible that some people choose to be "unbanked" or "underbanked" because they don't like the risk profile attached to banking, and sometimes that's a totally rational decision.
If you don't have a bank account, you don't have to worry about the bank inventing new fees to assess. Last time I opened a bank account, it came with a list of conditions and said 2 out of 3 of these MUST be met each month to avoid account maintenance fees. They're things like "Use your bank debit card at least 10 times this month" and "Maintain an average daily minimum balance of $x".
Fret not, however, for the bank distributes a small chart that can be used to help you ensure that you are complying with their demands, and thus can avoid punishment both for not spending enough money in a way they like and also for not having enough money on deposit. If you don't spend and/or have enough, you are getting dinged each month with a non-trivial fee.
Without a bank account, you also don't have to worry about information security, bank policies or hiccups impeding your access to your money, federal anti-money laundering regulations that require depositors to justify "large" cash withdrawals, state-imposed garnishments and/or levies ripping your money out from under you, and so on.
So again, I have a bank account and I appreciate the convenience of banking. But I think some people choose to forgo banking rationally, and that it's not something that should be treated as a social ill.
The only real potential issue around this is the regulations that the government put into place after 9/11, which may or may not be blocking some legitimate people from being legally allowed to open a bank account. Otherwise, I think it's silly to treat this like it's some big unjustice rather than a personal choice or an issue with super crappy banks ripping off depositors (which, again, hurts the poor the most; if you have $20k in your bank account, a $30 fee is an annoyance; if you have 20 bucks in your bank account, a $30 fee is now a cascade of $30 fees, and you end up owing the bank $250).
Having grown up in a lower-middle class neighborhood and lived among people who the OP was speaking about, I can assure you that they were not "unbanked" or "underbanked" because of any sort of risk profile attached to banking.
They didn't have checking accounts because they were generally unable to attain one.
I don't know what a "lower middle class neighborhood" is like but when I worked at McD's quite a few of my coworkers expressed "I don't trust banks" sentiment.
I know that people get their kicks by pretending like Americans have a nightly ritual of peeling the toenails off the nearest poor person and grinding them up for use as seasoning, but we're stretching the limits of believability here.
Check writing became popular in the late 80s and early 90s. Checking accounts were widely available by the mid 90s. I personally know several welfare recipients who wrote checks in this era.
In present day, checking accounts are practically free (but not literally free, so it's not good enough for some people). Some institutions even pay interest on them. I've never had my credit pulled when trying to open one. Banking is a fairly competitive business here, even though there are strict federal and local regulations, but it's getting worse since the dominance of electronic payments is making bank/credit products an increasingly indispensable convenience.
And let me add that it's not just McDonald's employees who are distrustful of banks. Bitcoin was invented to help address classes of problems arising from strong centralized control of the money supply, including the government but also the [potential] chokehold from large banks. One of bitcoin's price spikes was caused by the Greek government's 2015 stoppage on withdrawals, which left millions of Greeks without the ability to access their money for weeks. [0]
While it probably makes a lot of yuppies feel better to believe otherwise, getting mired in every financial instrument that the bank promises is good for you, trusting that the government will never issue an errant levy (as a result of identity theft, for example), opening yourself to the imposition of arbitrary fees, etc., does not automatically make you an intelligent person.
"I don't trust banks" is a setiment that actually makes sense when you only have $200 total to your name. Not to mention you are at constant risk of overdraft....
If you are at need of quick liquid capital I totally understand why you'd want to be cash only than risk stupid ATM fees, overdraft fees, whatever. It makes sense.
Nobody has ever said to me, ever, "I would really like a bank account, but I don't have access to one." It's always "I want to keep my money, I don't trust banks to keep it for me."
It's also complicates things, more than strictly necessary,that it.
Participating in the banking industry becomes a higher stakes venture than keeping your cash under a mattress.
It's a hard thing to get your average HN reader to understand unless you've 'been there, done that...'
"I don't trust banks" can be an euphemism for a number of things beyond the actual dislike of the US banking system (which, as you correctly pointed out, is irrational).
Prevalence of cash-based compensation, under-reporting income for various tax and benefits purposes, outstanding child support, unpaid debts, fines, outstanding collections (or disputes with collection agencies) - a variety of reasons that all lead to a feeling of control with cash in hand vs. feeling of loss of that control when an electronic number is suddenly eaten up by various ACH pulls and garnishments.
Many people "don't trust banks" not because they think there are elaborate conspiracies going on behind the scenes but merely because they think that the minute they slip up the banks are going to take advantage of them as much as they can. And they are almost exactly correct in that matter.
NSF fees are basically the equivalent of high-interest short-term loans. In some ways they are worse because the interest is assessed instantly and reducing your cash flow. Let's say you screw up and end up $5 off on your budgeting. OK, no big deal, maybe you take $5 out of your cash emergency savings (which might be, oh, $10 or $20) or you borrow $5 from a friend or family member until payday and you make things work. But if you have a bank account and you're off by $5 then you get hit with an NSF fee instantly. Now your bank account isn't just $5 in the hole, it's maybe $35 negative. So now you can't use it for anything until you come up with that extra $35, which is going to be more stressful to deal with. And then once you get things squared away after payday you're out that $30 for no perceptible real value. And that's assuming you don't get a cascade effect happening, which can easily happen if you're in a temporary money crunch.
If you're living close to the margins you can't afford to risk that sort of expenditure for no return happening every once in a while. Some people simply can't afford to live that way, it's easier to live on a cash basis. You cash your paychecks at the bank they were issues or you go to a walmart and you pay a bit of overhead. You pay your bills in cash or via money order or cashier's check. It'll cost a bit to live that way, a lot more than $30 a year generally, but it's predictable and it's under your control.
I'm from a similar background and this doesn't make any sense, but since I know it's going to devolve into an argument of "Well, they don't speak the primary language in the area, so they can't communicate with the tellers", "they're too old so they can't drive anymore", or "they're illiterate [either literally or financially] and their caretaker doesn't like taking them to the bank", I'm not going to go there.
I'm not saying people with unique issues shouldn't be accommodated, but their problems are more basic than something that a change in bank policy/regulation will adequately improve. The issue is not about being "underbanked", it's about improving accessibility to the environment.
It is true that at a time in the past, checking accounts were guarded more carefully, as the bank was fronting that money on your behalf and would have to be reasonably confident that it'd be in your checking account when they went to get reimbursed. That's not unreasonable, but checking accounts weren't the only type of account offered at the bank, and they absolutely were in wide use, even among unfortunate people, at least until they bounced too many checks.
This has mostly gone away with debit cards, because the bank can now tell whether you have the money in the account or not before they approve the transaction. Last time I got a checking account, the process was a formality, and there were no eligibility requirements in excess of the documentation legally required to open an account and the (small) minimum deposit.
The other thing is there's an implication here that banking is a human necessity. There's another commenter who laments that people in Nepal don't have a Mastercard.
People do not have a right to banking. It's a private service, and in many ways (described above), it's not a desirable one. Banks no longer pay an appreciable amount of interest, which was most of their value proposition to the consumer before they were able to shoehorn in as the keepers of electronic payment systems.
I'm just going to call a spade a spade here, and say that the reason there's a sudden interest in the "unbanked" is that they have a harder time participating in online commerce, and the government is anxious to hop on board that train because money in banks is money under their control.
Some founder of an irrelevant SaaS app is lamenting that a Nepalese person may not find it convenient to pay him $10 / mo to email the local air pollution index or something. That's a pretty silly thing to try to cause a moral panic over.
If we want to talk about how it's cool that Amazon has devised an electronic payment system that circumvents banking, that's great, I think it's awesome. But I'm not on board with the terms "un[der]banked" in the first place, as they imply that banking is a default, and then if we accept that, I'm still not on board with acting as if they are signals of some meaningful social malignancy.
I'm not really sure what you are arguing for or against or whose point you're addressing because the things you bring up are tangential to my original comment, which I still stand by and don't believe has been refuted.
"Last time I got a checking account, the process was a formality, and there were no eligibility requirements in excess of the documentation legally required to open an account and the (small) minimum deposit."
There were many eligibility requirements - you just happened to pass all of them.
Most underbanked/unbanked people don't have bank accounts because they do not meet those eligibility requirements.
- A small deposit to open an account is for many on the lower socioeconomic ladder not feasible.
- Others cannot pass a soft pull credit check
- Many cannot pass the ChexSystem verification because they have delinquent/unsettled accounts at other banks
- Some cannot procure a government ID or verify an address
- Others can't pass criminal background checks
I've seen it, and I've lived it, and I'm certain that they would much rather keep the 3-5% of their check that gets pocketed when they try to cash it outside the mainstream banking system, but they don't have any other options.
Yes, that's a reasonable argument in its favour; I don't necessarily disagree. It's worth acknowledging though that not-cash has advantages (to a robber) in tax evasion/laundering.
Not-cash is probably harder to steal, but I'd have thought it preferable. (To a robber.)
Saving the credit card charge isn't a win. Turns out that operating cash-on-delivery has significant overhead due to the cost of handling the cash, accounting for it etc. More than that, returns are much higher when the customer hasn't paid for anything. As a result, almost all ecommerce sites in India incentivise you in one way or another to pay online. I know one that will give you $0.5 off if you pay online, which is approximately what COD would cost them.
The joblessness created by in coming automation boom is going to result in a huge increase in the gray market economy. Amazon gift cards already play a big part, and this is the next step.
Amazon skips the credit card fees. The businesses working with them probably don't have to pay Amazon the money for a few weeks, meaning they get to carry an interest-generating balance in the meantime.
If you don't spend all of the money you put on your account, then Amazon gets to hold that cash until you do, generating interest on the money held.
All the while, the customers who need this service get something they couldn't before- online shopping without a credit card, including the better selection and price competition that online shopping offers. (Yes, it's sometimes cheaper offline, but not always).
They don't need a loop-hole. This is basically a semi-closed stored-value card, which are a grey area between debit cards and closed stored-value cards (think gift cards).
Yeah, the wording in the FAQ has me a little confused:
2) Where can I use Amazon Cash?
We have partnered with thousands of stores across the country, including CVS Pharmacy®, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets, and VG's Grocery with more retailers coming soon. A directory of all participating stores can be found at www.amazon.com/cash.
Are they saying you can also spend your 'Amazon dollars' at those stores? Because then that definitely does sound like 'bank of Amazon'. It would be a logical way to get a slice of that sweet sweet payment intermediary industry pie.
EDIT: And it would put them in prime position to collect data on their competitors' retail transactions...
> Are they saying you can also spend your 'Amazon dollars' at those stores?
No, clearly not:
> 1) What is Amazon Cash?
> Amazon Cash lets you add cash to your Amazon Balance [...]
> Your Amazon Balance can be used to shop for millions of eligible physical products and digital content
Amazon is selling a service that is sold at, say, CVS. And CVS makes a profit off of that service. CVS gets all of the cash, Amazon ends up with most, but not all, of it. Traditional credit card companies can charge somewhere in the realm of 1-3% or so on transactions, so imagine that CVS retains a similar or lesser cut.
Probably Amazon pays them 0-5% of the recharge amount. That's what they're saving on the credit card processing. Same as buying a Steam gift card at CVS or whatever.
It would be a strategically bad idea if CVS did allow purchases with Amazon bucks. I'm assuming the FAQ is just badly worded, because I couldn't imagine CVS making such an awful strategic blunder. It would be bad for CVS because:
- Amazon would be able to see what CVS customers are buying, for what price and in what combination. That would make it pretty easy for Amazon to pick off CVS customers.
- If a large enough percentage of CVS' sales were settled in Amazon bucks, it would put Amazon in a position where they could 'tax' one of their bigger retail competitors by jacking up 'transaction processing' fees.
You really don't want to be reliant on a wholesale monopolist who also happens to be a retail competitor.
> Curious though; can you ELI5 who actually pays the interest?
ELI5: Lots of people have business ideas that can make money, but often they need to have a small pile of money in order to make more money. Let's imagine you are such a person. I lend you money to start your business, then your business makes lots of money, and you pay me back. That's a good deal for you, but not for me. Your business might not work out, and you might lose all my money. I'll still lend you the money, but I want you to pay me back more money since I took this risk for you.
That's where the money paid in interest comes from.
Similarly, you might replace 'start a business' with 'buy a house' or 'buy a car'. You don't have enough money to do so right now, but you know that your life will be improved by having these things, so you borrow money to do them. The people lending you the money won't do it for free.
Less ELI5: Alternatively, the businesses holding this money for four weeks will estimate what the lowest amount they'll be carrying over the next 5 years will be, then just go and invest that amount in stocks, bonds, etc. Since their balance will never fall below that amount, the money is effectively an interest-free loan from Amazon that they use to make interest-earning investments with.
It is not really an innovation. This is basically private money that can only be used at a particular store.
At the dawn of industrial revolution large mills used to pay their workers with "scrip" -- a private type of cash that could only be used in company-owned stores. The company basically double-dipped: first profiting from the labor of the workers, then profiting from the mark-up on the goods and services "sold" to the workers.
Once you put money in Amazon cash, it goes to Amazon and nobody else. It is no longer "cash" or legal tender if you can't use it wherever you want.
My initial reaction, formed directly after readin "Amazon Cash" was similar to yours. This doesn't seem to be the devil I thought it would be though, since it's more analogous to gift cards than private scrip, IMO. Now, if you can use "Amazon Cash" in lieu of currency by, say, transferring it to other users at will, I'm right there with you - proprietary, private money is very creepy to me.
If you know unbanked people this is just an extension of the normal practice of buying Amazon gift cards at grocery stores and then using them.
Honestly I think that's most of the reason why Ralphs sells Google Play/iTunes/Best Buy/Amazon gift cards. People buy them with cash and then use them for themselves.
Yeah, its not the devil. It is more or less a "refillable" gift card. It would certainly be good for handling the occasional piggy-bank windfall (although a coinstar machine is better for that).
I worry, however, about financial products like this that get aimed at people who don't have bank accounts. They're a particularly vulnerable population.
1) this isn't money you earn from Amazon...so they're not creating a closed amusement park style ecosystem where you HAVE to spend the money you make with them
2) you don't have to convert ALL of your cash into Amazon credit. You can allocate a portion that is useful to find cheaper/better selection of products on Amazon. They rest you can spend wherever/whenever you want
But isn't that how all gift cards work? If I buy someone a gift card to Target, Target has that money at the time I buy the gift card not when whoever I give the card to spends it.
Is this really any different then buying an Amazon gift card other then you can choose the amount to put on it?
True, but if you're going to use this, it would be easy to put together your purchase, use the barcode to add that much money to Amazon, then complete your purchase. Yes, it would probably be simpler over the long term to get a bank account or a credit card, but this is perfectly usable if someone is already planning not to do that.
This is a misplaced sentiment. If Amazon were trying to trap people into spending money at their store and forcing people to pay exorbitant Amazon prices, then maybe this argument would make sense. But Amazon has a wide selection of products at low prices. And they'd be willing to let people extract their money and go use it elsewhere if it weren't for the pesky problems related to money laundering. There's really no reason to assume amazon is acting in bad faith or against the interests of people using this service.
I agree with you completely, and I am going to put forth a totally unfounded conspiracy theory that popped in my mind, consider it just an exercise in fiction:
What if Amazon, with the fact that they built that huge CIA data center (think AWS for the CIA, plus the other contracts, plus the WAPO purchas...) is now doing an op to determine where grey money may be going and on what...
Think of it as a data op...
the infra to determine where monied intentions are going - it has nothing to to with terrorism, but everything to do with totalitarianism.
Yes I know someone who started a bank with some partners. I had the same surprise "What do you mean you can just start a bank if you want?". It is not as hot and happening as a startup, but it turned out pretty well. A lot of regulatory red tape though.
This is another round of the "Amazon vs Walmart" war. People without banks or credit cards currently shop at Walmart. Now it is much easier for them to shop at Amazon.
"Much easier than before" or "much easier than at Walmart"? I buy the former, but I doubt that many of the cash-only customers shopping at Walmart live in locations or lead lifestyles conducive to receiving regular package deliveries easily. I'm skeptical that payment logistics are their biggest barrier to Amazon shopping.
I suspect many of us on HN have a distorted view of how hassle-free online shopping is because we live in buildings or neighborhoods where packages can be left without signature with a high probability of making it to us and many of us have the luxury of working from home on the odd day when we need to sign for an expected delivery.
I live in a tenement house with no doorman in a neighborhood where package theft can be an issue, and usually get my packages at work.
But it's easier to get packages near home now that UPS (at least here in NYC) just rolled out the 'Access Point' program where one can get their packages delivered to local grocery stores, bodegas, etc. for free. You just bring in an ID and pick up the package.
> I suspect many of us on HN have a distorted view of how hassle-free online shopping is because we live in buildings or neighborhoods where packages can be left without signature
That's what Amazon Locker is for. Not sure how widespread this is though.
I view this less as Amazon competing directly with Walmart than a Safeway or CVS using Amazon to provide more value to its current customer base.
Not sure if it's 100% accurate, but as an example, there doesn't seem to be a single Amazon locker location in the entire state of Mississippi according to Google Maps.
I just went to Amazon's locker search and plugged in the zip code for the state capitol and the Jackson, MS city hall (largest city in MS) - no results for either. I wonder why they're ignoring the state? We've got lockers in the semi-rural part of Pennsylvania I live in.
Absolutely. Much easier to shop at Amazon than before. They still have a long way to go to compete with Walmart in this area. Just pointing out the target audience for this change.
I lived for several years without a bank account and throughout that time I always had a home and a shipping address. Millions of people in the US don't have bank accounts. Not because they are vagrants or homeless but simply because they live too close to the margins to afford the potential economic chaos that having a bank account can cause.
Unbanked use prepaid visa cards to purchase things online. This just gets rid of the "tax" incurred when buying prepaid visa cards. Stat that would be interesting to see is smart phone penetration into this group of people.
Also unbanked can purchase amazon gift cards with cash.
They are growing really fast in the USA, mostly because the banking system here takes advantage of people much more than the banking system in the UK. Prepaid cards give people control over their financial lives, they are expensive but cheaper than overdraft fees and expensive credit lines. Growth is coming from younger demographics, so I'd say likely to keep coming: http://www.businessinsider.com/the-rise-of-reloadable-prepai...
No, people without banks currently buy amazon gift cards and shop at amazon anyway. This is just saving them the effort of typing in the gift card code.
11) What if I do not have a smartphone and want to use Amazon Cash?
It is not necessary to have a smartphone to use Amazon Cash. You can use our Print-at-Home option by visiting www.amazon.com/cash on a desktop browser and selecting “Get your barcode”. After logging into your account, you will be given an option to print out your Amazon Cash barcode which can be brought into the store for scanning.
Nice. This solves the internet at the library / school problem for a whole group of people. Still a lot of folks with the cheap LG phones for prepaid service. If they expanded to allow bill paying it would be an interesting challenge to Walmart.
[edit: also allows the "send me your code and I'll get you some money" like many use Paypal for like parents sending money to college students]
Yep, and also it would less useful if you had to verify you owned the account to deposit in it. The classic "sending money to college student" scenario would be problematic.
Thinking about it, this might be interesting from a community funding effort. Put the bar-code on your site, plead your case, and hope people send a donation.
"Would you like to buy some Itchy and Scratchy Money? Well it's money that's made just for the park. And it works just like regular money, but it's, er. fun." - Simpsons
For those do not see a value in this idea - is because simply you are living in a bubble. Lots of places in this world do not take credit cards.
In fact, in the center of the tech bubble - SF and if you happen to visit some restaurants in Chinatown, they usually have a sign says "Cash Only". CC fees are so high (even if you don't think it's that much) that those shops rather not take any CC and save themselves from BS charges.
Please please please think, design, and build a product for a world that's not in the bubble. A simple tech integration can adds huge potential value.
I agree with this sentiment. The other week I was speaking to one of the guys behind mookh.com, a Kenyan mobile payment startup and he said underbanked people needed solutions which catered to them in their current context.
I think the idea here is for amazon to allow customers to add cash balances to their amazon account without amazon incurring the 2.9% credit card transaction fee.
I think it's more about getting to the segment of customers who do not have credit cards. There's no way amazon is paying the same fee as anyone else in the world for credit card fees, they're the single biggest e-commerce site and have almost certainly negotiated some substantial deals.
> There's no way amazon is paying the same fee as anyone else in the world for credit card fees
I'm not so sure. Is there any actual evidence of large retailers negotiating down interchange fees? Even Walmart resorted to legislative pressure to regulate fees.
The power of network effects is strong. Retailers are reluctant to drop support for consumer-preferred payment methods and lose that business. That gives card networks a lot of negotiating power even with large merchants.
In the late 90s, my rate was 2.75% and the site I was running was very small potatoes. This era of 2.9% being considered standard despite additional competition, greater efficiencies, and higher volume is basically price gouging.
There's basically two reasons for that. One, 2.9% is only standard with premium processors like Stripe and Square. They charge a premium markup over interchange. You can still find "interchange plus" processors which will be much more value priced, although they usually are not as easy to work with.
Two, the underlying interchange rates have risen since the 90s due to reward cards. It's more expensive for merchants, but a lot of that goes into customer pockets via reward programs, so it's somewhat debatable whether it qualifies as price gouging since it's driven by consumer choice.
Very large retailers do negotiate their fees but there's only so low they can go because different parts of the fee go to different entities along the chain (visa/mc, banks, merchant providers, etc.)
For countries that are cash heavy, it's a common way to pay for online services. Some examples:
Brasil Boletos: this is interesting as there are registered and unregistered versions of Boletos. With unregistered customers can pay any amount of money to it.
Taiwan has a similar system. You take vouchers to various stores (like 7-11 or the post office), pay cash, then it'll make its way to the online company.
I was about to make that connection, this is similar to Brazil's boletos. The difference is that in Brazil it is a standardized system that spans all banks: anyone with a bank account that wants to receive money can have their bank issue a "boleto", which is essentially a barcode that routes money to the destination account. A payer can go to any participating place (post office, convenience store, bank tellers, etc) and surrender cash, which then gets routed through the banking system to the right account.
Which brings us to a potential problem: there has been a tremendous amount of fraud in this system (Brazil's Boletos), with all sorts of malware changing the barcode when it is downloaded in an infected computer to issue a boleto with a different destination account.
Back in 2014 this was well documented by Krebs[1], and at amazing detail by @assolini from Kaspersky[2]. I also documented a specific case that happened to a friend[3]. While it should be possible to mount similar attacks on the Amazon system, having people deposit money into others' accounts, it should be straightforward for Amazon to detect this, since it is a single issuer system...
I'm pretty sure this is behind the Chick-fil-a app's in-app cash as well.
I find value in it because I use the app a lot (there's one next to my office) and because they give you a free sandwich every 10-12 purchases. I'm guessing that free sandwich budget comes from the savings of transaction fees.
I think it's to serve the very large and very real market of people without credit cards. I guarantee they're not paying 2.9% credit card transactions; At their bulk they've got incredible deals with every card provider. I'm also sure they're giving a percent or more to the store accepting cash for them - Similar to gift card buying models.
7% of the US, a first world nation with amazing credit services, is unbanked[1]. From that same source, nearly 20% is underbanked - As in, they still go to Check-cashing places and get cash directly, rather than getting direct-deposit.
Credit card networks (Visa/MC/Amex, not Chase/Wells Fargo/etc) rely on their fixed infrastructure to extract profits. If Amazon can disrupt that business it'd be a massive shift.
(1) The purchase process is simpler: retrieve an Amazon Cash bar code, load cash onto it at the register, it's now on your account. You can reuse the same barcode every time you want to load cash onto the account. It can be a printed piece of paper you keep in your wallet.
Previously, you had to go to a retailer with physical cards in stock, pull one off the shelf, get it activated at the register, scratch the code, and go to a computer to load the code onto your Amazon balance. If your only internet access is at a library or school, that means two trips to reload your balance.
(2) It's cheaper for Amazon. They're paying a commission to the retailer and distributor (effectively selling the cards at less than face value). Amazon Cash eliminates most of that margin, and the distributor altogether. The commission for the retailer doesn't have to be very high since none of the transactions will have credit card fees.
Retailers like Amazon sell those cards wholesale at less than the face value. There's some overhead too but I would wager that's covered by a gift card distributor in consideration for markup.
Usually you can load whatever amount you want on a gift card.
They don't come pre-loaded with anything I thought and you pay for what you want at the cashier.
There's a ton of fraud with Amazon Gift Cards too. On sites like Paxful you can buy a $500 card for $250. Then people use the cards to buy other digital gift cards or items. It seems hard to stop.
Isn't this just same old gift card model but now with ability to manage balance online? Also riding the float is nothing new. There is no "interest" anymore. Opportunity cost, sure. This is a rational iteration on the status quo and looks to be step in right direction for consumer.
>To use your credit, simply purchase an eligible product from one of the following digital categories: Appstore, Kindle books, Digital Video, Digital Music, Digital Software, and Digital Video Games
This puts the risk on Amazon, so I'd be curious to see if this would be worth the no-shows. Then again their Lockers already auto-return after a few days, but I think that having "already paid" is likely a commitment device.
I am surprised that they didn't use Amazon Locker as a logical hub for adding cash credit.
Many people mentioning countries like India and Indonesia here, but even in Germany (and specifically Berlin) Cash is very much King. Even for larger purchases. It's one of surprising things for many people visiting.
> Amazon Cash transactions are non-refundable, except as required by law. Learn more from the Amazon.com Balance and Amazon.com Gift Card Terms and Conditions.
Note that the referenced T&Cs do not specifically address the circumstances under which refunds are available. For example, in certain states (CA?) you are entitled to a cash refund after the balance of an account drops below a specified threshold ($5-10?). It would be useful to know what all of these exceptions are, so that people can make an informed decision.
I see this as trying to get more sales from their app from customers who only have cash.
Now, an amazon customer without a credit card or bank account has to use a gift card, which they purchase at a store. That is a lot of hassle, IMO. Sometimes an Amazon gift card is not available (i.e. not sold at Walmart) and they purchase a visa or amex or vanilla. Those have high fees and/or very confusing sign up requirements.
There is no way to reload a used amazon gift card. Since amazon has no brick and mortar store they can't sell me a one-time-only card for future loads.
Bankless and cash only customers, that I have seen, all have smart phones. Most of the time the reference numbers used to send and receive money are texted.
So, I think having a method to load an Amazon gift card from a store with cash is their end goal. [As an aside, I tried to find out if Amazon will accept credit cards at point of sale registers for gift card loading. This is, of course, prohibited, in most places as you can't buy a Visa card with anything except cash or a debit card).
I assume they have data that says the cash-only, smartphone sophisicated cohort underuses Amazon.
Isn't this Amazon taking a page out of Jack Ma's playbook? Never stop vertically integrating. You have to outscale everyone if you want to leverage that into slimmer margins.
If taken at face value, that's what their FAQ suggests. I'm partially reposting a comment I made above, since you seem to be the only other person here who is thinking along the same lines as I am.
2) Where can I use Amazon Cash?
We have partnered with thousands of stores across the country, including CVS Pharmacy®, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets, and VG's Grocery with more retailers coming soon. A directory of all participating stores can be found at www.amazon.com/cash.
Are they saying you can also spend your 'Amazon dollars' at those stores? Assuming the answer is 'yes', it means Amazon is looking to get a slice of that sweet sweet payment intermediary industry pie. But more importantly, they get these retailers' data for cheap and can figure out exactly where the marginal price for it lies. Think about it. These retailers might be paying Visa 2.5% transaction processing fees. Along comes Amazon who offer, say 2% fees (which might be roughly the rate they've negotiated for themselves with large payment processors).
Using CVS as an example:
Amazon start offering CVS customers varying rebates / fixed percentage discounts like: anything you buy from CVS with 'Amazon Bucks' only deducts 95% of your sales docket total from your 'Amazon not a bank account'. CVS will want their money either at point of sale or, at the very latest, through an end of day reconciliation. So in the interests of 'fraud protection' they will need to provide sales data to Amazon for those purchases. This is bad for CVS because:
- Amazon would be able to see what CVS customers are buying, for what price and in what combination. That would make it pretty easy for Amazon to gradually pick off CVS customers.
- I imagine Amazon would probably loss-lead for a while until they've become the dominant form of payment. If a large enough percentage of CVS' sales were settled in Amazon bucks (which Amazon can incentivise through rebates and discounts, hence the initial loss-lead), it puts Amazon in a position where they can 'tax' one of their retail competitors by jacking up 'transaction processing' fees.
I might be totally misunderstanding the situation here, and it's just a case of the FAQ being poorly worded. Otherwise, large retailers who sign up to this are committing a fatal strategic mistake (although I imagine the bean-counters would love it, not realising the long-term implications).
That's one way of looking at it. And definitely a plausible move for Amazon for the reasons you outlined.
Especially if the long term strategic goal of Amazon lockers / physical points of presence is to morph into 711-style "80% of what you need in life". Which they could naturally have delivered to you within an hour.
An alternative thread, which I'll admit to cribbing from someone else's comment on the "Betterment" HN post, is that this is about the other side of the game (or even lower on the food chain): becoming a bank.
Assets under management affords the opportunity to do everything else. And it makes it impossible for anyone else to cut you out, once you scale to a "too big to ignore" size.
Amazon payments from Amazon accounts? Suddenly you're saving credit card fees + making interest on balances. Which you can roll into being that much cheaper than Walmart.
If you get assets stored under your control, that's the ultimate vertical integration.
Agreed. Though the crazy thing is that they can do both simultaneously. If this is what they intend, it's a brilliant move on Amazon's part. It may very well be that in the not too distant future we'll all be using Amazon bucks in the Amazon company town (the entire world?)
OK that might be a bit too sci-fi. Still, interesting to think about....
Edit: Pretty cool how it works the barcode, wonder how it is adopted. I remember using PayPal for the first time a few years back, where you used your phone number and at the time only Home Depot would have it. Buying those peanuts and ice tea.
But is there a fee? (Says no fee)
I made mistakes, can't get bank account right now. So I use pre-paid services or use PayPal accounts/Bitcoin (laughing on Bitcoin part, have yet to use it and don't have much of it).
Also use a card from my job, one of those types of cards that you get working at a factory or whatever.
It sucks when you have to pay a fee, like the PayPal Prepaid cards are pretty cool but you lose ~$5.00 a month.
I kinda wish that m-pesa thing was in the US. But why too, I seem to do more harm than good by spreading what money I have in various places.
Ahhh... read some more it's their money. Still, I wouldn't mind potentially having another place to store money. Even if it can only be used at Amazon.
> Choose to receive your barcode via text message or print-at-home. Bring this barcode into any participating store and show it to the cashier to add money to your Amazon Balance.
As a customer I don't really understand this concept. Why do I bring my barcode to one of the stores (CVS, etc.) to reload my Amazon Balance...?
The use case is that you have cash (literally folding money) in your hand and the store is the place to turn that physical cash into electronic credit in your Amazon Balance.
28% of Americans don't have a credit card. 7% don't have a bank account. Those numbers are massively higher in countries that are more cash reliant like India. In 2014 20% of the world was "unbanked", a good search term if you want to do more research.
Growing up poor meant that we never saw credit cards. That meant that we had to be very creative when it came to pay online. Something like Amazon Cash would have been amazing to have!
A fair number of folks still pay bills with money orders since they don't have credit cards, checks, or debit cards and can just pay cash for the money order.
Gift cards might be closer, but this has less waste.
These people may not have the credit for credit cards or a bank account with a debit card (again, bad credit or maybe even just distrust of the banking system).
As others have pointed out, this is basically buying a gift card and applying it to your account in one step instead of two.
Or rewards programs effectively making every purchase 1.5% cheeper than they would in cash. The unbanked and underbanked have no access to either. Another example of the "poverty tax" that many people have to pay. Your comment makes you sound kinda like an asshole.
I get that part but my local grocery store sells Amazon gift cards in $10 to $50 denominations. You can buy these with cash just fine and there is no fee that the store charges and there is no tax. A $25 card costs $25 cash.
This is really brilliant. It's the first step in serving the unbanked or underbanked. The next step after this is to allow people to mail their checks to Amazon and have the full amount show up as a balance in their Amazon Cash account, thereby skipping the fees check cashing places charge.
Then you buy computers that keep their value like Apple and sell them for cash
- sorry I just realized you would have gone in a circle -
but that's a pain/lose money. I agree though that sucks, being stuck there. Not a huge Amazon shopper myself. Still they do have nearly everything so inevitably I will more than likely return.
I think many people are not realizing the fact that this is a master stroke by Amazon to break into the payments & wallet market. Wallet's are going big in Asia especially India. Softbank backed PayTm is leading this right now. Amazon could turn this easily and get a major market share by pushing payments in India.
So, to unpack this a bit, the elephant in the room is that Banks still wait days for a check to clear (hello BOA) when we obviously have the technology to check (no pun intended) if a cheque is valid incredibly quickly.
So people who lesser means resort to gift cards, amazon cash, etc.
This seems like Starbucks' mobile payment system, but in reverse. At Starbucks, you spend at the local store, and fund your account using your credit card. With Amazon Cash, you fund your account at the local store, and spend it online.
You can actually refill your account in person with cash too, it's just that credit card reloads are more convenient for most people buying $7 caffeinated milkshakes (no judgement, I love me some frap)
If I'm not mistaken, this is exactly what barzahlen.de is doing in Germany. I'm not really clear on the reasons for such a thing existing in Germany, but if you want to buy online for cash, you can.
It looks like the retailer is essentially selling a gift card that gets automatically credited to the purchaser's Amazon account via the barcode they present. I suspect the retailer is getting a small cut of the sale just like they do with normal gift cards. Some of those giant gift card stands rent space from stores and I suspect Amazon has a similar arrangement for this.
Well amazon isn't really competing with kum & go (a gas station) or grocery stores (yet). CVS, I would also say not a big competition--you primarily go there when you need a couple of items quickly.
This seems inconvenient. You need to load cash into account before being able to spend it. How many online stores in card-deficient countries operate is that first you make the purchase, then you pay for it at some physical location (ATM, grocery store chains, etc.). Having to preload cash first allows for a situation where the price of items in your cart unexpectedly rises and you don't have enough money in the account and you have to go fill it up again.
The target audience here is people with no credit cards and no bank accounts. The cash-only or cash-mostly population. For them, this is probably the only way they could buy on Amazon.
Seems to be somewhat common in Eastern Europe, where payment kiosks are located at many convenience stores. In a card-less society they're used for utility bills, mobile operator account top-up, settling government fees and fines, buying lotto tickets, etc. Amazon would be just another option on a kiosk like this https://i.ytimg.com/vi/qYEh0TtsW5c/maxresdefault.jpg
Yes, these things. After you make an order in an online store, you pay for it using a kiosk. But Amazon Cash requires you to have money on your Amazon account before you can make an order. Not a single online store in Russia works like this.
Any idea what the incentive is for the stores to be a part of this? Explicit cut of the total dollar amount, marketing to appear "hip" by partnering with Amazon, or betting on the extra foot traffic driving immediate sales?
Is there any way to go back to cash? It references the transcations as being non-refundable. Does that mean it's more of a "purchase" of Amazon.com fun bucks (i.e. scrip) rather the depositing a balance?
If you wish you had this for your company, there is already a service that lets people do online shopping (anywhere, not just at Amazon) and pay with cash in their neighborhood: http://paynearme.com/
Why go through all this hassle and confuse the heck out of everyone when really all you're doing is pre-making a gift card that is immediately added to the account balance?
Just go to Walmart, buy a gift card with cash, and use it.
From a technical viewpoint, Amazon Cash is a private currency, pegged to the USD. The currency is spendable across multiple companies (Amazon, CVS Pharmacy®, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets, and VG's Grocery). Amazon can "issue" it by crediting Amazon Cash accounts. Etc.
> Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that."
I don't think this is supposed to. It's more like when stores started to offer credit cards themselves because it was more profitable. This is the same idea, different execution.
Increasing the utility of cash is very important to push back against the seemingly inexorable trend toward all private information being collated in a few larger data centres and susceptible to mass surveillance.
You can also do this with Coinstar machines, which offer conversion of arbitrary amounts of cash (coinage or bills) to multiple kinds of gift cards, including Amazon, for no fee.
Maybe it's just my area, but I've found fewer Coinstar machines around as of late (vs grocery stores, etc that have begun to run their own machines instead and cut out Coinstar as the middleman).
The few that do exist seem to be in WalMart locations. WalMart doesn't want the competition, so those Coinstar machines had the Amazon gift card options disabled.
7% of US households are unbanked, and 20% are underbanked(1).
Many people are paid in cash, or simply cash their checks at Walmart or a check cashing place. The money never touches a bank account, and they don't have a credit card.
Paying for things with cash in similar ways is actually pretty common in other countries. When booking an airline ticket in Indonesia, I was surprised that there wasn't even an option for credit card payment - after clicking "purchase", it gave me a code and said to go to the 7/11 equivalent (which might have even been 7/11), give the counter my code and cash for the ticket.
[1] - https://www.fdic.gov/householdsurvey/