For 73 percent of Americans, participating in the digital economy is easy. All they have to do is secure internet access, enter their relevant credit, debit or bank account numbers with the merchants and service providers they want to buy from, and set up their mobile banking app. After that, paying bills, sending money to another person, booking travel and shopping with one click is a cinch.
However, for 27 percent of American consumers who are unbanked or underbanked, according to the FDIC, things aren’t nearly as seamless. For those customers, many of the digitally backed transactions that have simply become the inexpensive norm for most consumers remains a friction-laden experience that can be costly in terms of both time and actual money.
The consumer base affected by these problems — PayPal CEO Dan Schulman noted in a Facebook Live broadcast with Walmart’s Daniel Eckert, SVP of Walmart services and digital acceleration — isn’t the stereotypical niche group most people tend to associate with the “unbanked” or “underbanked.” This, Schulman noted, is the 90 million or so American consumers who need to be better served.
The Facebook Live broadcast served as an announcement that the two companies — PayPal and Walmart — will team up to bridge that gap, with the launch of PayPal Cash at Walmart locations nationwide for PayPal account holders and PayPal Cash Mastercard customers.
The Importance Of On-Ramps And Off-Ramps
The partnership will allow PayPal users to put cash into, or take cash out of, either their PayPal accounts or PayPal Cash Mastercard accounts at any Walmart customer service desk, ATM or cash register for a flat $3 fee.
That flat fee is central to the PayPal Cash value proposition and consistent with Walmart’s commitment to everyday low prices on all of its products and services. This model was “ripe for application to the provision of financial services,” Eckert noted. PayPal Cash, and its everyday low-priced flat fee, follows Walmart’s agreement with MoneyGram to provide flat fees on Walmart2World’s money transfer services as well.
Loading cash into a PayPal account for online use — for shopping or paying bills — is now immediately available at all approximate 4,500 Walmart stores (not counting Sam’s Club) nationwide. The PayPal cash out option will be available at all Walmart locations starting early next month.
The partnership, Schulman noted in his conversation, is a natural extension of PayPal’s ongoing efforts to make access to financial services something that every single consumer can participate in. Other recent instances of this effort include its acquisition of the Hyperwallet payments platform earlier this year, and its rollout of the PayPal Cash Mastercard line in 2017. The tactics and expansions change, but the goal remains the same — making it easier for consumers to digitize their funds, then access, manage and use those funds as needed digitally.
It’s a start, Schulman told Eckert, and proof that technology can be of massive use in solving the issues that unbanked and underbanked people face. However, he noted, on its own, it isn’t enough.
“Customers need off-ramps from the digital economy, as well as on-ramps. You have to make it possible for customers to have the physical capability to take cash out where and when they need it,” Schulman said. “You can’t ask people to put cash into a digital platform, but then make it difficult or impossible to take it out.”
Eckert agreed, noting that this is particularly true of the cash-using population. Digital and card payments have grown, he noted, and check payments are slowly fading away. Cash payments, though, remain a stable and central — and even slowly growing — part, in a large subsection, of consumers payment lives.
That’s for good reason, he noted. Cash is consistent, it always works and, when stacked against the many options faced by the unbanked and underbanked when looking at cash alternatives, it is also the cheapest and easiest thing to use. By opening up Walmart as the access point to both add cash in or take cash out, the calculations become very different.
Cash usage in the U.S., according to the Global Cash Index, has remained relatively steady in the states since 2003, ranging between 14.3 percent and 15.5 percent of the gross domestic product (GDP). According to the Index, 24 percent of American consumers make all their purchases in cash. This is due to the size of the spending pie increasing in the U.S., even though the percentage of cash being used to transact at the physical store is declining.
The Power Of Scale
Since Walmart is within a 10-minute drive of 90 percent of the U.S. population (many of which are open 24 hours a day), with nearly as many branches as the largest banks in the world, access to those services is more or less ubiquitous. Combining that physical scale with PayPal’s online merchant scale — now with access to 20 million merchants worldwide — makes for “a very compelling marriage,” Schulman noted, one that he said provides a real range of value for their joint customers.
Eckert said that PayPal and Walmart can do much more jointly than they can apart, adding that the future of financial inclusion isn’t going to be about one player coming up with a silver-bullet solution for 90 million consumers, but about ecosystems working together and combining assets to serve their needs.
“We have to work on these issues for the wide range of consumers who are counting on companies like ours to come together and give them the kind of access they are lacking today,” Eckert noted.
PayPal Cash isn’t the first partnership that Schulman and Eckert have created. In 2012, when Schulman was at American Express, he and Eckert launched the Bluebird product, which was designed as an alternative to debit and checking accounts to help consumers better manage and control their everyday finances. Bluebird is still available through Walmart Money Centers today.
Schulman and Eckert’s latest pair-up is, once again, back at the drawing board — making sure that consumers experience all the power that goes with mainstream financial products, even if their point of entry for those products is a bit different.