New Apps Reach the Millions of 'Unbanked'

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By Tobie Stanger

Greetings from Finovate Fall New York, an annual conference where financial software companies show off their new products, both for consumers and the business community.

Finovate has, over the years, introduced lots of tools for well-heeled and sophisticated investors, and this fall's session was no exception. But notably, this year the conference showcased some innovations for the millions of "unbanked" Americans, who because of poverty, fear, or lack of information, don't have real bank accounts.

PayNearMe touts itself as a less-costly alternative to prepaid cards and their attendant fees. The program lets individuals order items or experiences online and pay for them in cash at one of 6,000 participating 7-Elevens, without the use of a credit or debit card. The typical purchase transaction involves no fees to the consumer.

Say you want to buy a sweater for your girlfriend on Amazon. You go to the Amazon Gift Card site and click on the PayNearMe icon to choose the exact amount you'd like to purchase. Rather than paying online, you print out a PayNearMe transaction slip. At the 7-Eleven, you show the printed slip to the clerk, pay the price of the sweater in cash, and the clerk then prints out a receipt that has your unique gift card code. You enter the code on the Amazon checkout page for your girlfriend's sweater, and the sweater is on its way to you or your girlfriend. If you don't have a printer, PayNearMe will instead send a text message with a transaction code to your mobile phone. You can then give the clerk your transaction code, pay in cash, and obtain the gift card code to use on the website.

What's the benefit for the consumer? No extra fees—unless, of course, you figure in the cost of getting to the 7-Eleven.

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Danny Shader, the company's founder and CEO, says the same transactions can be repeated for, say, Greyhound bus tickets, airfares and movie tickets. "We've basically turned all these [7-Eleven] stores into online ticketing agencies," he says. Shader says the company is attempting to find other retailing partners that are ubiquitous nationwide. He won't name names, but one can imagine: McDonald's, CVS, gas stations. How about the U.S. Postal Service? "It would be a fabulous partner for us if they wanted to do it," he says.

Plastyc markets a mobile banking alternative for people who usually use prepaid cards. Among its unique features is the ability to generate a paper check even if you don't have a traditional bank account. Participants log on to the site via their mobile phones, name a payment amount and recipient, and a company contracting with Plastyc prints the check and sends it on to the recipient. The first check of the month is free; additional checks cost $2 each. CEO Patrice Peyret says most participants only use that first check, usually to send in the rent.

Essentially the service acts as a prepaid Visa card without the actual plastic. It isn't free; it's $2.99 a month. But that fee drops to 99 cents a month if you deposit at least $500 monthly into a pre-paid account. Peyret says there are no activation or purchase fees. You can direct-deposit your paycheck, as well as your tax refund. Customers of this service often don't have regular cel phone accounts, so Plastyc lets them drag and drop money from their prepaid Visa card into their cel phone accounts, right on their mobile screens.

Finally, there's the offering of mFoundry: A nifty app that lets you send a gift card, with text message, to someone else's mobile phone. Your recipient's phone retrieves the image of an actual debit card, including a live activation number. That number can then be input anywhere that accepts debit purchases.

—Subscribe to ConsumerReports.org or check out Consumer Reports’ Money advice.

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