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May 23, 2022
Vulnerable Populations and the Case for Cash
We recently wrote a post about communities not being able to access cash because of natural or man-made disasters. Severe weather and war, for example, may leave a bank branch inoperable. But even in "normal" times, access to cash remains an important consideration, especially for consumers who use it as their only or preferred means of payment. With this post, we look at how cash remains an important payment option and how accessing it may be becoming more difficult for certain vulnerable populations. These vulnerable populations—who tend to be low- to moderate-income households, rural communities, and recent immigrants—are more likely to be un- or underbanked (underserved) and often rely on cash to buy groceries and pay utility bills.
Even with an uptick in digital payment usage , cash remains a critical payment choice for many Americans. Some may be unable to use digital payment options because they lack access to broadband or a smartphone, for example. Others may not be able to access these options because they are unbanked. Data from the Federal Deposit Insurance Corporation's 2019 report How America Banks reveal that approximately 5.4 percent of households (7.1 million) were unbanked in 2019. Almost 14 percent of Black households are unbanked and presumably rely on cash or alternative payment options.
There are many reasons why cash can be a person's default method of acquiring goods and services, according to a forthcoming paper titled "Cash Is Alive: How Economists Explain Holding and Use of Cash" by Oz Shy, a senior policy adviser at the Atlanta Fed.
Unfortunately, recent data suggest that challenges to accessing cash existed prepandemic and accelerated during the pandemic. It may be especially difficult for the underserved, cash-reliant consumer, according to a report by the National Community Reinvestment Coalition:
- The number of banking institutions declined from approximately 18,000 in 1984 to fewer than 5,000 in 2021.
- The rate of bank branch closures doubled during the pandemic.
Rural areas tend to see the most bank branch closures, and those closures have contributed to a decline in ATMs as well. Adding to this, banks have been more cautious in providing accounts to independent ATM operators in part because of anti-money-laundering concerns. So some banks are adopting policies that prohibit business relationships with independent ATM operators or are charging much higher fees for their services—which means some ATM accounts with banks are closing and fewer ATMs are being established.
These closures matter, even to the unbanked consumer, who may need bank branches and ATMs, for example, to obtain cash from a prepaid benefits card for unemployment or social security payments, get a cash advance on a credit card, or cash a check at a bank where the check writer has an account.
As the digital economy expands, people in underserved communities and those who are cash reliant, whether by choice or lack of other options, are at risk for being further marginalized in the financial system. To help ensure that everyone, regardless of payments preferences, is included in this system, cash access and preservation in underserved communities across the nation remain important to maintain.
March 28, 2022
Abigail Adams: "Remember the Ladies"
Women's History Month (WHM) reminds us of how far women have come and how far we still must go in terms of financial equity, education, and inclusion. While women today manage about 80 percent of the finances in the household, they lag behind in making investing decisions often because of being more cautious than men.
One woman who broke through many of these barriers is Abigail Smith Adams (Nov. 22, 1744—Oct. 28, 1818), one of our country's founding mothers. Many people know of Abigail through her roles as the wife of our second president, John Adams, and the mother of our sixth president, John Quincy Adams. She was also the first First Lady to live in the White House.
But there is quite a bit more to Abigail. In colonial times, married women were considered their husband's property. Women could not own or purchase real property, manage money, pursue a formal education, nor have a voice in political matters. Married to John Adams at the age of 19, and self-educated, she bore six children, with four surviving to adulthood. While John Adams was away in France, the Netherlands, and England from 1778 to 1788, he left Abigail behind (except for when she joined him in Paris and London for several years) to manage finances for the household even though women by law could not.
Abigail invested her family's money in government securities (stocks and bonds)—a decision that ultimately made them wealthy, according to Woody Holton's biography. Abigail defied societal norms in other ways. She used "money which I call mine" to contribute to their wealth (even though it was considered the husband's property), valued independence and freedom, opposed slavery, and advocated for women's education. She was a trusted adviser to her husband, and her strong influence led others to refer to her as "Mrs. President."
On March 31, 1776, Abigail wrote in her now famous letter to John Adams to "Remember the Ladies:" when he was at the Continental Congress:
I long to hear that you have declared an independancy—and by the way in the new Code of Laws which I suppose it will be necessary for you to make I desire you would Remember the Ladies, and be more generous and favourable to them than your ancestors. Do not put such unlimited power into the hands of the Husbands. Remember all Men would be tyrants if they could. If perticuliar care and attention is not paid to the Laidies we are determined to foment a Rebelion, and will not hold ourselves bound by any Laws in which we have no voice, or Representation.
Last year for WHM, I wrote about women's financial rights from the 1970s onward. Recent posts have noted the importance of inclusion in our nation's coins and currency, the barriers broken by women, such as Maya Angelou being the first African American woman on a US coin and Maggie Lena Walker being the first African American woman to found a bank for her community. Abigail is remembered for her advocacy for women and her financial savvy and is included on a US Mint series in the First Spouse $10 Gold Coin, with "Remember the Ladies" on the face alongside her image.
As we remember the ladies for Women's History Month, we can acknowledge the most influential women in payments for 2022 who are making a difference in financial equity and inclusion. Happy Women's History Month!
March 7, 2022
Cash Is Critical in Times of Crisis
Before I get into the meat of this post, I want to acknowledge that the events in Ukraine are on all our minds. Our hearts and thoughts are with those caught up in this conflict.
Among the photos coming out of Ukraine are images of the Ukrainian people lined up at ATM machines. These pictures underscore that cash, and access to it, is critical in times of crisis and uncertainty. Here at home in the Southeast, the Atlanta Fed is always on alert during hurricane season in the event that we have to step up our supply of cash to banks.
In addition, understanding the continuing role of cash in an increasingly digital world has been a core focus in the payments research we do through the lens of diversity, equity, and inclusion. Cash remains an important payment option among our many other options, including cards, checks, apps, and digital currencies. There are many reasons some people prefer to use cash: it helps them manage their budget, they don't have a bank account, they lack access to internet or smartphones and therefore lack access to digital payment apps, they're comfortable with cash from a lifetime of use, they're seeking anonymity, or they just plain choose to use it.
Although some businesses had already stopped accepting cash by the time the pandemic hit, the pandemic opened the door for many other businesses to stop taking it. Some businesses stopped offering in-person services and went to online platforms where customers could not use cash, such as order ahead, curbside pickup, and delivery subscription services. Concerns about money and hygiene, the coin supply disruption, and the ease of using cards and apps also discouraged cash use.
Those who use cash, whatever their reason, have been affected by the decisions of these businesses and by other decisions stemming from the pandemic, according to survey data. They've also been affected by the reduced number of ATMs in the United States due to bank and business closures, often in rural and low-income areas, or due to changing policies affecting independent ATM operators. Access issues to ATMs even in the United States can make it more difficult, and perhaps more expensive, for people to get cash when they need it most.
In times of natural disasters, when electronic systems could fail, people turn to cash. People also turn to cash in times of manmade disasters. The reliance on cash as the go-to payment in times of crisis and as a personal choice underscores the need for cash preservation and ease of access.
While the Ukrainian people have much more important things to deal with, and our thoughts are with them as they navigate this crisis, understanding the role that access to cash plays in people's lives is something we will continue to look at here at the Atlanta Fed.
February 22, 2022
Black History Month: Banks and Currency
In honor of Black History Month, I thought it would be interesting to explore some of the history of currency and banks specific to the Black community. As noted in a previous post, representation of one's group on currency and coin can be an important reflection of financial inclusion and diversity. The first Black woman depicted on a US coin is Maya Angelou; the quarter is now in circulation and can also be purchased at the US Mint.
One excellent resource is the Black Money Exhibit, a traveling museum exhibition that highlights over 10,000 years of Black history and features more than 300 bank notes from 80 countries and territories. The exhibit was founded and is directed by Dr. Harcourt Fuller, a Fulbright Global Scholar and history professor at Georgia State University. The exhibit was launched in 2018 at the Auburn Avenue Research Library on African American Culture and History in Atlanta. Two of the oldest bank notes in the collection are from the Confederate States of America, c. 1861/1862. They represent enslaved people hoeing cotton on one and roasting sweet potatoes on another.
Fuller has also created an educational module for schools (K-12), a documentary about Black women on money, an exhibition companion book that provides a historical overview of currency and the depiction of Black people on bank notes worldwide, and several already-released songs from a forthcoming soundtrack to supplement the educational materials. While the exhibit is not currently on display other than on the internet, Fuller plans to collaborate with other organizations this year in the United States and several other countries to take the exhibit worldwide.
Historical focus is warranted on the founding of America's first Black banks. Why are Black-owned banks important? Two books were written by Tim Todd, a historian with the Kansas City Fed, that answers this question: Let Us Put Our Money Together: The Founding of America's First Black Banks and A Great Moral and Social Force: A History of Black Banks. As Todd notes:
"These banks were not purely a financial endeavor or a business opportunity but more importantly, were created with the primary mission of public service in mind. Community banks were catalysts in helping families and individuals establish businesses, buy homes, and pay for an education that could open the door to opportunity. In their role as pillars of the community, Black banks were involved in some of the most important race relations events in American history and during the struggle for civil rights, Black bankers were among the leaders in the Black community who spearheaded the fight for social justice."
The books are available for download or to order through the Kansas City Fed using the links above. The Kansas City Fed's educational team is developing curricula to supplement the books which can be used in schools.
Maggie Lena Walker was the first African American woman to charter a bank, which she did on July 28, 1903, in Richmond, Virginia. According to the website, the St. Luke Penny Savings Bank operated until 1930, then merged with two other Black-owned banks, the Commercial and 2nd Street, to form the Consolidated Bank and Trust Company. When it was purchased in 2005 by the Abigail Adams National Bancorp Inc., it was the oldest continually operated Black-owned bank in the country. The bank was purchased by Premier Financial Bancorp in 2009, then merged with four subsidiaries to form Premier Bank.
Based in Atlanta, Citizens Trust Bank was the first Black-owned bank in Georgia. In its 100-year history, it celebrated other firsts for a Black-owned bank by becoming a member of the FDIC in 1934 and joining the Federal Reserve System in 1947.
The history of Black money and banks provides a fascinating and necessary perspective as we continue our efforts to expand our financial diversity and inclusion initiatives.