Around 25 million people across North America do not have access to traditional banking services like a savings account, chequing account, or a credit card. Due to financial hardship, or mistrust of the banking system, they must use cash as much as possible or incur the fees that come with prepaid debit cards should cash not be an option. They are also likely to make regular use of payday lenders rather than as a short-term emergency last resort.
Thankfully, this group of people, collectively referred to as the unbanked, are being granted a chance at a financial life through the emergence of online payment providers. Due to lack of overhead and minimal staffing needs, these institutions are able to offer traditional banking services without any of the barriers that would prevent someone under the poverty line from joining a major bank. Let’s explore some of them now.
No Fees or Minimum Balances
Companies that facilitate online payments tend not to require minimum balances to open an account. That means anyone with access to the internet, which is free at your local public library, can have a safe place to store and use their funds.
A large brick-and-mortar bank would likely require you to have a few thousand dollars before accepting your business. This is simply not a reality for anyone caught in the spiral of living paycheck-to-paycheck, especially when there’s more than one mouth to feed.
Another reason the unbanked have moved online for their financial services is the lack of monthly fees and transaction fees. An extra ten dollars per month is no trifle when penny-pinching isn’t an option but a necessity. It could be the difference between going to bed full and having to skip dinner just to survive.
The same goes for the five-to-seven-dollar fee for a money order, and the up to fifty-dollar fee for a wire transfer, every time an unbanked person must send funds to a friend or family member. If transaction costs are eating into your bottom line, you can easily learn how email money transfers work and get more of your hard-earned dollars where they’re needed most.
A Chance at a Better Life
From a ten-thousand-foot view, online payment providers help the unbanked put their money toward a better quality of life. This can be in the form of a savings account where money can accumulate toward short-term goals, such as:
- An emergency fund: savings equivalent to three-to-six-months of basic expenses in case of injury, loss of employment, or a large unexpected expense.
- Starting a small business: with an emergency fund in place, it’s much easier to use extra money to sell a product or service and create an extra source of income for yourself.
- Investing: you can also use savings to purchase stock and bond index funds that will grow over time through interest and capital appreciation.
Some payment companies will even offer payday loans for extreme emergencies and act as fiduciaries to make sure the customer can pay it back. That way, they won’t fall into further hardship.
As your online account balance grows, the closer you’ll get to financial independence and never having to worry about living under anything less than decent conditions. Move your money online so you can save more of it and reclaim your financial life.