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How America’s Cashless Economy Has Punished the Homeless for Being Poor

Image: Feet of individual with a cup for money

Over the last decade, the number of individuals living in New York City homeless shelters surged as high as 50% at times. The COVID-19 pandemic has had a disproportionate impact on the nation’s homeless population, which is also hit harder by climate change-driven events than any other segment of the population. In cities where rent prices have skyrocketed in recent years, the homeless population will sadly continue to grow while the effects of climate change worsen. Meanwhile, Americans now carry less cash in their pockets, preventing the homeless from receiving adequate funds through cash transfers. Compounded by climate change, COVID-19, and soaring rent, the increasingly cashless American economy has left homeless individuals virtually unsupported. In response, the businesses profiting from these cashless transactions must do more to support the homeless individuals they harm. 

A 2017 survey conducted by US Bank revealed that one in two Americans hold zero cash on them half of the time they leave their homes. Instead, U.S. consumers carry debit, credit, and gift cards and use digital money wiring apps such as Venmo and Zelle. A 2019 Nilson report found that ​​82.2% of American adults have a debit card, and 71.67% of American adults have a credit card. As of July 2021, the digital wiring app Venmo had over 65 million users, reflecting astonishing growth since the company’s origins in 2009. According to the US Federal Reserve Bank, total card transactions increased by 7.8% annually from 2009 to 2018, while the emergence of cryptocurrencies has further removed cash from society. Although the economy’s shift toward cashless transactions increases efficiency for most consumers, in theory it devastates America’s homeless populations.

Cash transfers likely comprise a substantial percentage of many many homeless individuals’ income. Unfortunately, our society’s diminishing reliance on cash prevents people seeking to help homeless individuals from providing them with money. Most homeless individuals lack the technology to receive funds through Venmo or Zelle, and in most cases an address is a prerequisite to opening a bank account, effectively barring these individuals from the gains of the cashless economy. As American society transitions further away from cash, homeless individuals will suffer even more.

However, some argue that a society with fewer cash transfers to homeless individuals may actually alleviate the homelessness crisis by motivating homeless people to find employment and preventing them from accessing drugs and alcohol. In reality, this assumption is unfounded. A recent study conducted by the non-profit organization Foundations for Social Change and the University of British Columbia showed that cash transfers help homeless people find stable housing faster. Furthermore, the study demonstrated that homeless individuals who received cash transfers spent 39% less on drugs, tobacco, and alcohol, than those who did not receive transfers, dispelling the stereotype that homeless people waste the money they receive. 

On the other hand, in some aspects, our digital transaction based economy has provided innovative solutions to tackle poverty and homelessness. European innovators developed the Helping Heart jacket which allows people to donate to a homeless individual by tapping a debit or credit card on the individual’s jacket. Digital fundraising pages such as GoFundMe and SnapRaise have also made raising funds and awareness for homelessness nonprofits more efficient. 

In our increasingly cashless society, everyday Americans will not have the cash on hand to help empower the homeless, meaning that governments and corporations must take further action to solve the homelessness crisis. While the Department of Health and Human Services has increased its focus on providing housing and healthcare to the homeless, the federal government’s efforts have not kept pace with the corresponding need. To fund an increase in homeless aid programs, Congress must consider taxing the banks and businesses – such as PayPal and Zelle – that have fueled the growth in America’s homeless population. Specifically, Congress should marginally raise the corporate tax rates that banks pay and directly allocate that funding toward lump sum payments for the homeless like the Foundations for Social Change study did.

Ideally, the new tax would come from firms’ profits, but some firms such as PayPal – Venmo’s parent company – report that Venmo does not generate a profit. Consequently, the tax would force Venmo and some credit card companies to increase their user fees, indirectly passing the tax on to consumers. However, this is not a bad thing for two reasons. The first is that these programs’ users would likely have given cash out of their wallet to homeless people ten years ago, but today they no longer do. Thus, higher transaction fees would serve as the digital equivalent of these consumers paying homeless people directly in cash. Second, increased costs for using debit cards and wiring apps would incentivize some consumers to return to cash, which would likely increase the cash transfers that homeless people receive. While implementing such a tax on digital transactions would certainly face substantial corporate opposition, the tax would benefit the homeless population and preserve the efficiency of the cashless economy.

Alongside a stronger government role in defending the homeless, companies can privately recognize their role in exacerbating the homelessness crisis, and attempt to correct it. In addition to pledging financial resources to the homeless, they can create new offices that focus on using digital technology to help, instead of hurt, homeless individuals. Such an initiative has been launched in the form of a new app called “Samaritan.” Through the app, people can donate to and learn about homeless individuals, and then the homeless can access their funds using a bluetooth keyfob called a “beacon.” In England, a similar app, Greater Change, allows strangers to donate to homeless individuals, but homeless individuals do not gain direct access to funds and have partner charities screen purchases.

While the current homelessness crisis appears dire, Congress can help hold financial intermediaries accountable and help the homeless, while still fostering economic activity.

Photo: Image via Flickr (Marco Verch)