I have noticed more and more politicians are picking up on the potential for alternative payments in helping the poor, with words like "unbanked" and "underbanked" increasingly replacing other euphemisms such as "underprivileged" and "disadvantaged". Recently former US President Bill Clinton and current California Governor Arnold Schwarzenegger jointly published an op-ed piece entitled "Beyond Payday Loans" in the Wall Street Journal:
I have noticed more and more politicians are picking up on the potential for alternative payments in helping the poor, with words like "unbanked" and "underbanked" increasingly replacing other euphemisms such as "underprivileged" and "disadvantaged". Recently former US President Bill Clinton and current California Governor Arnold Schwarzenegger jointly published an op-ed piece entitled "Beyond Payday Loans" in the Wall Street Journal:
The American dream is founded on the belief that people who work hard and play by the rules will be able to earn a good living, raise a family in comfort and retire with dignity.
But that dream is harder to achieve for millions of Americans because they spend too much of their hard-earned money on fees to cash their paychecks or pay off high-priced loans meant to carry them over until they get paid at work...
Clinton and Schwarzenegger see the problem in the high fees many are currently paying for check-cashing services:
Imagine the economic and social benefits of putting more than $8 billion in the hands of low- and middle-income Americans. That is the amount millions of people now spend each year at check-cashing outlets, payday lenders and pawnshops on basic financial services that most Americans receive for free -- or very little cost -- at their local bank or credit union. Over a lifetime, the average full-time, unbanked worker will spend more than $40,000 just to turn his or her salary into cash.
I do think that bank accounts (or at least the "starter accounts" proposed by the authors) are a necessity in the United States. This doesn't really apply in China, though, where it's actually quite easy to get a bank account.
Prepaid payroll cards are one increasingly popular solution to this problem in the US. While the cards often have higher and more fees than a typical bank account, they're still a much cheaper option than cashing a check at a pawnshop or grocery store. They're safer, too, and if connected to Visa or MasterCard, they offer a far greater flexibility in spending than cash alone--making online payments easy, for example. In China, on the other hand, cash on delivery is still a common payment method for purchases made online.
With saving habits well established throughout China and basic banking transaction fees low, it seems more likely that payment providers will make their money only when consumers actually spend money, and not through the various ATM withdrawal and other transaction fees. There is plenty of money to be made for the companies that can create simple, convenient, and safe for Chinese consumers to spend their money.
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