More than 60 million American adults have no bank account whatsoever or rely on alternative financial services such as payday loans, check cashing services and money orders, according to a 2019 report from the Federal Reserve. That means people in those households can’t make payments via check, credit card or debit card — or it’s more expensive for them to do so.
Some of these individuals find effective alternatives, perhaps using a digital wallet such as PayPal or a peer-to-peer system such as Venmo. Others, by necessity or preference, still use cash despite the cost and inconvenience.
Consider an unbanked person whose employer pays her by check. A check-cashing service might charge anywhere from 1 percent to 13 percent. Once she has the cash, if she wants to use some of it to pay a municipal utility bill, she’ll need to visit an office during business hours, which could conflict with her own work schedule. If the government office is closed due to COVID-19 precautions, she’ll find it especially hard to make a payment.
Online digital government services let users make payments whenever and wherever they like, in just a few seconds. But those systems generally don’t include a cash payment option.
Voucher-based solution
That situation is starting to change. Recent developments now make it possible for e-government services to take payments in cash.For the cash-paying user, the online experience starts as it would for anyone else. The user enters data, the online service performs the necessary lookups in a back office system and calculates the sum to be paid. The online service then transfers the user to a checkout page, much like the checkout tool found on any e-commerce site. There, the user picks a payment method –— credit card, debit card, PayPal, perhaps another method or cash.
Choose cash, and the system creates a voucher, which the user can download, print or receive via e-mail. The system also creates a financial record to note that payment is pending.
The user takes the voucher to any of thousands of participating retailers across the U.S. — including grocery stores, big box stores and others. She presents the voucher, which contains all the information connected to the transaction, and pays in cash. The retail agent completes the transaction, marking it paid and transmitting that data to the government agency’s system.
Governments have three options for setting up a cash payment facility:
1. The agency’s web application redirects users to a fully hosted common checkout screen to make their payments. Once a cash-paying user creates a voucher, the system takes him back to the agency’s site.
2. The agency’s web application includes its own checkout screen. When a user selects the cash payment option, application programming interface (API) sends the data to an external system that produces a voucher.
3. For an agency without its own web-based application, the technology vendor provides an option that doesn’t require deep integration with back office systems. Instead, the vendor produces periodic reports on cash collected, at a frequency that meets the agency’s needs.
Early success
One of the first local governments to use the new payment model is Pulaski County, Ark., whose pilot system for collecting cash payments for property taxes went live in September 2020. In the system’s first three weeks, users made nearly 1,000 cash payments, totaling $325,000. Since then, the highest daily collection has been $100,000 with individual payments averaging $300.Pulaski County receives cash payments through approximately 53 retail locations. Since those stores keep longer hours than government offices, the system makes it easier for property owners who prefer to deal in cash to meet their obligations, especially during COVID-related shutdowns.
As of January 2021, Pulaski County was receiving about eight cash property tax payments daily and had collected a total of about $400,000 through the voucher system.
Along with property taxes, governments can use the same technology to accept cash for court fines and fees; family payments into jail commissary accounts: licenses and permits; child support payments; fees related to parole and probation; and a great deal more.
In any of those cases, a government can offer a cash payment option without adding significant operational expense. A small convenience fee added to each transaction covers the cost of running the system.
With a new model for cash payments, digital services are now accessible to a population that never could use them before. Those citizens gain greater convenience, while government agencies gain new efficiencies and a streamlined revenue flow.
For more information, visit: https://www.egov.com/
