To shop online, you typically need a credit or debit card. That excludes the roughly 9 million U.S. households that were “unbanked” (meaning they have no checking or savings account) in a 2015 FDIC survey, not to mention people who have a credit or debit card but don’t want to use it online due to data security concerns.
However, innovations in payment processing offer alternatives.
PayNearMe, which launched in 2010, allows consumers to pay in cash at one of 28,000 retail locations (including CVS Pharmacy, Family Dollar and 7-Eleven) to complete transactions with insurance companies, utility providers, the Internal Revenue Service and major retailers including Macy’s, Lowe’s and Target.
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Michael Kaplan, general manager and senior vice president of merchant processing at PayNearMe, explains his company’s process using Greyhound bus as an example. “You would go to Greyhound.com, book your ticket from San Jose to Los Angeles, and when you got to the checkout page, next to Visa and Mastercard, would be the option to pay with cash,” Kaplan says. “When you click on the pay with cash option, we will generate a barcode that is generally delivered to the consumer’s smartphone or could be printed out.”
You’d then take the barcode to one of the participating retailers and provide payment in cash. “We reach out to Greyhound in real time and alert them that the transaction is completed,” Kaplan adds. “Once we get signal back from Greyhound, we authorize the point of sale at the retail location, and the consumer walks out with a receipt for the transaction.”
Meanwhile, PayPal allows users to fund their accounts by purchasing PayPal My Cash cards at retailers including Family Dollar, CVS Pharmacy and Dollar General, and online retail giant Amazon recently launched a product called Amazon Cash with a similar premise.
“Amazon Cash lets customers add cash to their Amazon Balance at thousands of participating convenience, grocery and drug stores by purchasing and automatically claiming an Amazon.com Gift Card to their account,” wrote Amazon spokesperson Tom Cook in an emailed statement.
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Amazon Cash charges no fees to the consumer, PayPal My Cash has a $3.95 activation fee and PayNearMe encourages merchants to absorb the fees, but transactions with some merchants incur a fee that can be as high as $5.99, which is disclosed up front. Ryan Falvey, the managing director for Financial Solutions Lab at the Center for Financial Services Innovation, says this approach benefits everyone. “Certainly hidden fees can be bad for consumers, but they’re also probably not in the best long-term interest of the providers,” he says. “We find in our work, the more clear and transparent the fee structure, the better.”
When PayNearMe initially launched, the company focused on serving “unbanked” customers. However, in light of recent data breaches, the product now appeals to people with plastic as well. “Over time, we’ve recognized that [banked consumers are] certainly a segment of the population we service,” Kaplan says. “For budgeting reasons or for privacy reasons or the fact that they get paid in cash [they] prefer to transact this way.”
Money expert and syndicated talk show host Clark Howard points out the irony of brick-and-mortar stores providing another way for customers to shop online, particularly on Amazon.
“That’s the funny thing about how people are competing with each other and then at the same time, they are cooperating with each other,” he says.
Howard hasn’t heard any consumer complaints about these services, but he worries that it could present some gray areas for consumer protections, because cash doesn’t provide a dispute process like you’d get from a credit card issuer.
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“One of the problems with any method of buying things online that involves you paying with the equivalent of cash is, if there’s a dispute about the quality of goods or services, your money has taken a one-way trip,” he says. “This parallels the same issue with people buying online with a debit card. You do not have any rights of any note under the law if the goods don’t arrive or if they represented the goods one way [and the goods aren’t as promised].” Clark also worries about what would happen if scammers hacked into a cash account and zeroed out the balance.
However, Kaplan says PayNearMe’s contract with merchants ensures that consumers won’t get shortchanged. “When a biller [or] merchant signs up to offer the PayNearMe service, they contractually agree to deliver the goods or service that consumer paid for at the time we notify them of the transaction,” he says. “The consumer also gets a receipt for that transaction which is their proof of payment. If there was a dispute, the customer could contact our support team and we would work to resolve the dispute with the biller [or] merchant.”
Cook says customers can reach out to Amazon’s customer service team if they have any issues with their balance or the products they order. PayPal did not respond to a request for comment, but the company’s website states that funds are not insured against loss and customers should only use PayPal My Cash to load funds into their own account, not to pay other people.
PayNearMe was one of the first players in this space and now moves a billion dollars a year through its network. When asked how he feels about bigger companies entering this market, Kaplan points out the potential benefits. “I think it’s absolutely bringing positive attention to the need for these types of solutions,” he says.
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These Tools Let You Shop Online Without a Credit or Debit Card originally appeared on usnews.com
