How the Unbanked May Affect Amazon Go's Expansion

It's been roughly a year since Amazon opened its very first grocery store in Seattle. Since then, the e-commerce giant has added six more locations, and it has plans to reach 3,000 stores across the States by 2021. This would introduce an entirely cashless setup to huge markets all over the country, promising a convenient and fast way to shop. Just walk through the turnstiles and your online account gets charged for what's in your bags - no cashier, no lines, no physical exchange of money. It's that simple.

But for many of America's unbanked, it's actually quite complicated. As a population that relies solely on cash, they're shut out from Amazon's cash-free grocery stores. That's where Amazon Cash comes into play. This online payment option may help give the unbanked greater access to digital payments.

What does it mean to be unbanked

The unbanked are people you know; they're often living from paycheck to paycheck and struggling to make ends meet. This usually means they don't carry a significant balance in their checking accounts, nor do they have a lot of cash to invest in financial services.

Mainstream banks deem them unprofitable. Many of their terms and conditions - things like a minimum balance or monthly account fees - make it impossible for the unbanked to get approved for basic things like checking or savings accounts and credit cards. As a result, they end up using cash for most of their purchases - from grocery shopping or even paying rent.

Unfortunately, you need a credit card and bank account if you expect to top up your Amazon profile or any other online payment system for that matter.

Don't confuse them with the underbanked

While they share similar names, they don't face the same financial hardships. The unbanked don't have any financial accounts because they don't meet mainstream bank standards.

The underbanked, on the other hand, meet the criteria for basic financial products like a checking and/or savings account. However, many of the underbanked have poor or thin credit that makes it difficult to secure a personal loan or line of credit through these same services.

When the underbanked can't jump through hoops set out by traditional banks, they turn to online lenders like MoneyKey instead. Online lenders offer a simpler, more convenient way to borrow online with installment loans and lines of credit, and they often put less of an emphasis on credit ratings when reviewing applications. Because they've eliminated much of the red tape that can complicate traditional cash loans, online cash advances tend to be easier and faster to secure.

Lawmakers rally behind the unbanked

Together, the unbanked and underbanked make up a significant portion of the American population. Nearly 32.6 million households are denied full financial participation at a time when an increasing number of businesses are going entirely digital.

A New York City councilman is one of many politicians hoping to help this marginalized group. Ritchie Torres introduced legislation that may put a halt on Amazon's expansion into the city. He believes businesses that only accept digital payments or credit cards are discriminating against the financially disenfranchised - the unbanked who can't get a credit card or a bank account that links to e-payments.

If passed, the bill would make it a legal requirement for stores to accept cash in addition to credit, debit, and digital payments - in effect, branding Amazon Go, with its zero-cash policy, illegal.

New York joins several other cities tabling these bills, including Chicago and San Francisco - both of which have an Amazon Go location already.

How can Amazon bounce back?

Bills like Councilman Torres' could throw a wrench in Amazon's plans for expansion. The crux of Amazon Go grocery stores is that they're entirely cashless. Customers must have the Amazon app to shop in these stores.

Without it, there's no way for Amazon's Just Walk Out cameras to apply items to your digital cart or for the smart turnstiles to charge your account for these items. There's no cashier to provide an alternative payment method - and the only Amazon employees present are there to help you find where the olives are located.

Although legislation protecting the unbanked may certainly delay development, it may not pull the plug entirely. Amazon has a trick up its sleeve with Amazon Cash.

Predating Amazon Go by a full year, Amazon Cash isn't a new service. It's been a cash converting system for the past two years or so. It gives people who can't bank through conventional means a way to convert their cash into digital currency on the Amazon website.

This service is perfect for anyone who wants to shop online but only has cash. All they have to do is visit a participating retailer that accepts cash, and the clerk will deposit it online on their behalf. There's no need for a credit card or an online bank account. The customer only needs a special Amazon barcode to ensure the cash is uploaded to the right account.

As the number of participating retailers increase, the convenience of Amazon Cash will rival the ease of shopping online with a credit card. It could help the unbanked participate at Amazon Go - as well as the cashless economy at large.

However, Amazon Cash isn't perfect. Unlike traditional financial organizations or their online loan alternatives, this cash conversion service isn't regulated by the same laws. It's a free market business run by one of the richest men in the world - a man who has no reservations exploiting his working poor workforce.

It may be a risk the unbanked are willing to take; as more businesses adopt cash-free policies, they otherwise risk being left behind.