Closed bank accounts, closed doors: Life without a bank account

How life without a bank account means always weighing bad options

Accion Venture Lab’s Paul Breloff (left) surveys the challenge ahead.

Recently, Paul Breloff participated in an activity hosted by FinX designed to simulate the experience of someone who is excluded from the traditional banking system in the U.S. due to economic circumstance. What follows are his notes on the experience.

On November 18, 2014, a group of about 25-30 financial service folks (a handful each of bankers, startup executives, investors, tech company reps, journalists, and nonprofit leaders) gathered in the Mission [in San Francisco] to put ourselves in the shoes of underbanked customers in the U.S.

Part scavenger hunt, part ethnography, FinX was a great chance to see the bewildering array of frustrating financial options available to underbanked customers in the U.S. who are short on liquidity, short on time, and short on attention. Here’s the limited description I got before showing up:

“This experience is not your traditional workshop or walking tour of a local neighborhood. It’s an actual step into the shoes of consumers making real-time decisions about fees, expediency, time, and convenience. The 2-hour in-the-field challenge is a rare opportunity for executives of financial institutions, FinTech innovators, and nonprofit leaders to go beyond simply hearing about the challenges that consumers face, and experience the real-life constraints and options they have. With your team, you will attempt to complete financial transactions, such as cashing a check, acquiring and using a prepaid card, or seeking out a small loan.”

Once we arrived, we were split into about nine teams of three and were given a packet of materials describing our situation. We were to pretend we were on a two-hour break between shifts and had to get done a variety of things before our 12:00 p.m. shift started again. We were to assume we didn’t have a bank account, and had to cash a check, get a money order, pay rent and electricity, load a prepaid card, purchase a gift for our niece, and grab a snack — this was, after all, our hypothetical lunch hour. We also had to figure out the best rate we could get on a $500 loan from anywhere we wanted.

I was on a team with Ariel Schwartz, Senior Editor at Co.Exist/Fast Company and Ethan Bloch, CEO of a fintech startup called Digit. We got off to what we thought was a fast start, finding a pawn shop and quickly negotiating a $30 value on my watch — which I was pleased with, given the fact that it was 15 years old and not worth much to begin with. We were also in high spirits when we located a shop called Ria (a chain across the U.S.) to cash our check. It seemed like it would be quick and easy and we could get everything done at once with only a $0.99 check cashing fee — our customer service representative, safely hidden behind a plexiglass wall, encouraged us politely that this would only take a couple minutes. But alas, they couldn’t get a hold of the payer of the check to verify by phone, and AML/CFT checks on me got tripped up. (Apparently, they couldn’t figure out why I lived in DC but was cashing a check in San Francisco.) We lost 40 minutes hanging around being told it would only be “three more minutes.” We were all a bit (politely) pissed off. So that didn’t work.

Next, we went to an Ace Cash Express. We waited in line about twenty-five minutes (precious lunch hour minutes ticking away), but once it was our turn, we were thrilled to learn we could indeed get most of our tasks done, but at a cost: $6 to get the $90 check cashed, a one-time membership fee with Ace, and other fees to get money onto a prepaid. Unfortunately, we couldn’t pay our rent check because their system “couldn’t find the payee.” They said this “happens all the time” and that we should “come back later.” A not-so-fantastic option if you’re working two shifts a day and still want to eat, sleep, and see your family.

Next, we had to send money to a family member, so we had to find a Western Union. We were able to do it, but again, were shocked by the cost: a flat-fee of $5 to send $30 to our friend in the U.S., who was going to pick it up later that day. That’s the going flat rate for a domestic remittance under $50: the equivalent of nearly 17 percent! This in an era where most of us can send value via PayPal or SquareCash or Venmo for no or little cost, riding on ACH or debit rails — if you have a bank account, of course. Unfortunately, our family member was told when she went to pick up the money that, “the systems were down,” and that she should, “try coming back in two hours.”

On the hustle back to our 12:00 p.m. shift, we had to pick up a gift for our niece. We chose a beautiful yellow hula hoop and Brazil soccer ball from the dollar store, where, thank goodness, they accepted our MasterCard prepaid card. We were running short on time so only had time to grab a coconut water and banana on the trek back to our second shift.

None of this was rigged; these were all real stores, processing real transactions with real checks and GPR prepaid cards, treating us like real customers. And it was a great experience. It made me think quite differently about the tradeoffs between fees, convenience, and dignity. As the clock was ticking, considerations of cost, quite frankly, went out the door as we desperately tried to just get things done and not show up late for our shift. In some ways, perhaps, “done is better than cheap.” Also, it was just amazing to confront the bewildering array of choices. Walking down Mission Street, there are quite literally dozens of check-cashing spots, pawn shops, big signs promising fast cash, each with its own confusing set of matrices outlining prices based on a ton of variables. Who has time for that — and who really cares at some point?

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