Can I pay back a loan with cash?Jul 23, 2020
For some consumers, repaying a financial loan with cash is the most logical and convenient method. So should more lenders be offering this solution?
In previous articles we have discussed issues relating to financial inclusion, and the reliance many consumers still have on cash as their primary source of payment. For these consumers who are unable to access traditional financial services such as bank account – according to the World Bank 31% of the global adult population were unbanked in 2018, and Mastercard estimated that over 136 million Europeans did not have bank accounts in 2016 – or simply do not wish to disclose their financial data online, being financially excluded has significant consequences.
These consequences extend beyond simple access to payment methods such as bank cards, to prevention from other services offered by finance businesses such as credit agreements and loans. Consumers that are unable or unwilling to engage with banks are excluded from these services, which in turn pushes them even further in to the realms of financial exclusion.
But being a cash consumer shouldn’t automatically disqualify someone from being able to take out a loan
In the vast majority of cases these consumers would be more than capable of repaying a loan agreement if they were able to make payments using a method that they had access to. Therefore, these potential customers present a huge potential market for lending companies. By extending credit to consumers that are reliant on cash to make repayments, lenders would not only increase the number of customers that they are able to engage with, but also differentiate themselves from the more traditional lenders such as banks.
And even consumers that do have access to some financial services may turn to alternative lending services for small or short-term loans, as the minimum loan value their bank offers is too high or the minimum repayment period is too long. For these borrowers, being able to repay a loan quickly and efficiently is paramount. For many the ideal solution would be to pay with cash.
How to integrate cash payments easily
But, while being able to pay back loans with cash does have significant potential for lending companies in theory, this will only be truly beneficial if making and collecting cash payments is easy and convenient for both the consumer and the lending company.
Physically handling cash is not an option. It is arduous and requires the lender to commit a huge amount of resources to collection and reporting. Accepting cash payments digitally via an eCash solution is significantly more efficient; by printing a scannable barcode on an invoice or loan agreement, or by enabling the loanee to generate their own barcode via a web page or an app the lending company can direct a third party financial technology provider to collect appropriate payments on its behalf. All what is required of the lending company is a simple integration of the fintech provider’s eCash solution.
Increasing the likelihood of repayment
Adding eCash as an alternative payment solution not only opens up opportunities for lenders to target cash consumers, it also increases the likelihood that existing and potential future customers that are planning to repay their loan via traditional payment methods do so regularly and on time. There will be circumstances where a consumer has access to cash and wants to make loan repayment but either doesn’t want to deposit the funds into their bank first or doesn’t have time to do so before the payment is due.
For many consumers being able to take out a short-term loan in a safe, convenient, legal, and anonymous manner is important. To do this, the loan must be completely separate from the applicant’s financial details. This means not having to use financial information such as bank details or card details to make repayments against the loan.
Being able to make repayments via cash will attract a greater percentage of these consumers than a repayment method that requires a commitment to share personal or financial data.
Ease for consumers
But for all these benefits, consumers will still not consider making loan repayments with cash if it is too inconvenient to do so. If they cannot easily reach a payment point where they can physically hand the money over, or they are unable to make the payment easily once they arrive at the payment point, the process will be deemed too difficult.
Ensuring that they partner with an eCash solution provider with an extensive system of payment points is the best option to achieve this. For example, Paysafecash has over 170,000 payment points located in almost 30 countries. This vast network of payment points means that consumers are able to repay their loans with cash in a user-friendly manner without needing to extensively travel in search of someone to hand the cash over to.
By partnering with a provider like Paysafecash, both lenders and borrowers can optimise their experience of repaying financial loans with cash.