Poor Are Unwired In Electronic Age Bank Innovations Won’t Serve Urban Low-Income Consumers

The shabby check-cashing outlet in the city’s South Central section is hot and crowded as scores try to cash welfare checks on the first day of the month.

Steve Jones would like to use the well-appointed Bank of America branch across the avenue, but “you can’t cash no check unless you can have an account,” the 21-year-old says.

Consumer advocates worry that the poor - already underserved by banking - also are threatened with becoming the great unwired as the financial industry strides into the electronic age with online banking, computerized loans and smart cards.

And the cost of personal computers and a lack of training in their use won’t help.

“It’s very likely that the poor will be left further and further behind,” said Margot Saunders, managing attorney for the National Consumer Law Center.

“You could see increasingly those people being shut out of basic banking services and, you know, in our society that sort of access is critical to being able to function as a citizen,” said Allen Fishbein, general counsel for the Center for Community Change.

“The professional elite thinks that the entire world shifted over to computers,” he said. “The reality is that in most communities people … go to brick-and-mortar facilities with paper checks.”

But the bricks are falling as banks consider closing dozens of branches.

The poor won’t be completely shut out. For one thing, new teeth in the federal Community Reinvestment Act put pressure on banks to serve poorer neighborhoods.

“The net effect is that there is more banking service in low economic areas,” said Fritz Elmendorf, spokesman for the Consumer Bankers Association. “But it may not be in the form of a fully manned office.”

That means cheaper alternatives like ATMs, computerized kiosks, on-line accounting and supermarket mini-branches.

Some feel electronic alternatives cannot provide the specialized service that the poor may need. Besides language barriers, activists say many have spotty work or credit histories that might be understandable to human bank officers but not to a computer.

Bank of America is looking at ways to introduce low-income consumers to electronic banking, company spokesman Rush Yarrow said.

“It’s gonna be a challenge for everybody,” he said. “For banks to kind of reach out in this really new area and … for low-income users to get hold of access and really understand.”

Ready or not, though, the poor may soon find themselves forced into the electronic banking age.

The Clinton administration is pushing to eliminate welfare checks and food stamps by 1999 in favor of the electronic benefit transfer, or EBT. Recipients receive special cards that they can use like debit cards to withdraw cash from ATMs or to buy food.

Rep. Michael Castle, R-Del., chairman of the House Banking Subcommittee on Monetary Policy, argues that EBT will benefit the poor in the long run because for one thing, they don’t have to carry a lot of cash in high-crime areas.

But making the poor reliant on such computer-linked cards gives them new problems, according to recent House testimony. They can’t afford to defer food purchases or rent payments because the computer system is down, or to run around looking for a working ATM, said a report by the National Consumer Law Center and the Food Research and Action Center.

And Cheryl Davis, 35, a welfare mother of five, is concerned that purchases made with an EBT card could be recorded by computer.

“Let me pay my own bills,” she said. “I don’t want nobody to do that. They don’t have to know how I spend my money, if I spend $2 on a pack of cigarettes.”