Online shopping just became a more viable option for cash-only customers — one that could help them save a buck or two.
Amazon AMZN, -0.28% on Wednesday announced the U.S. launch of Amazon PayCode, a free service that lets customers shop online, receive a “PayCode” at checkout and then bring it to their nearby Western Union WU, -0.22% within 24 hours to pay for the order in cash. Eight in 10 Americans live within five miles of one of the 15,000 eligible Western Union locations, Amazon said.
“We’re embracing the complexity of a world where cash and digital payments are likely to coexist far into the future,” Khalid Fellahi, Western Union’s president of consumer money transfer, said in a statement.
The feature rolls out to Americans in the coming weeks and has already been introduced in 19 countries including Chile, Costa Rica, Malaysia and Kenya. It marked Amazon’s latest outreach to people who don’t use credit or debit cards.
The retailer in 2017 introduced Amazon Cash, a no-fee service that lets customers add money to their Amazon accounts at partner stores like CVS Pharmacy CVS, -0.35% and 7-Eleven.
But paying with cash also makes us less willing to part with hard-earned money, research has long suggested.
And that day-long window during which Amazon PayCode customers can pay for their order could marry the breezy enjoyment of online shopping with the added ability to reconsider a purchase, Peggy Sue Loroz, a consumer psychologist and professor of marketing at Gonzaga University in Spokane, Wash., told MarketWatch. If customers don’t pay for their order within the 24-hour window, their order is simply canceled, according to Amazon.
“The fact that it’s not just an instantaneous decision, and there’s basically that 24-hour cooling period before you actually execute on that transaction — I think that’s very meaningful,” Loroz said. “Twenty-four hours is a substantial amount of time to think about whether they actually want to go through with that purchase.”
This period of time to rethink an online purchase, she added, “might be most important for your typical cash-paying consumer” who may come from an unbanked or lower-income household.
In fact, the system may leave Amazon with plenty of abandoned orders, added consumer psychologist Kit Yarrow, the author of “Decoding the New Consumer Mind.” “In the time it takes them to pay, they’ll change their mind,” she said.
Expanding the accessibility of online shopping to cash-reliant consumers could also introduce greater potential for impulse-buying. While consumers still made 68% of impulse buys in-store in 2017, according to a CreditCards.com survey of 1,003 adults, the share of Americans who reported making most of their recent impulsive purchases online rose from one in five in 2016 to one in three in 2017.
Still, PayCode is a smart move by Amazon to expand its customer base to people who may not previously have considered online shopping a viable option, Loroz said, as well as a way to extend Amazon’s availability beyond a higher-income and banked customer base.
Some 6.5% of American households in 2017 were unbanked, meaning they had no savings or checking account, according to a survey by the Federal Deposit Insurance Corp. — the lowest level since the survey’s inception in 2009. Lower-income and less-educated households had higher rates of unbanked status, FDIC’s survey found. About two in three unbanked households reported using cash to pay bills.
Amazon, for its part, cited a statistic from the Federal Reserve’s 2018 Diary of Consumer Payment Choice, which found that 77% of payments are made in person, and 39% of those in-person transactions are made with cash. Cash constitutes 30% of all transactions and 55% of those below $10, the same report found.
The service also reflects the reality of income inequality in the U.S., which complicates the transition to a cashless economy, she said.
“We have so many customers who aren’t in a position to do that — who don’t have access to, or are uncomfortable with, or are in other ways not really able to take advantage of banking services,” she said. “This isn’t a country where we have such a narrow gap between rich and poor that we can all just do the same thing.”
Amazon stock is up 20.4% for the year to date and Western Union is up 33.1%, compared to a 16% gain for the Dow Jones Industrial Average DJIA, +0.13% and a 19.5% increase for the S&P 500 SPX, +0.03% over the same period.