Amazon’s new service offers a compelling value proposition for the underbanked. It comes as an alternative for consumers who don’t have access to a bank account but who want to shop on Amazon. GlobalData Financial Services writes

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Given that cash was used for around half of all transactions valued at $50 or less by US consumers at the point of sale in 2015, this new service is likely to appeal to a large proportion of the US market. It must compete with prepaid cards in reaching the underbanked, though as Amazon Cash is free to use, it has a definite edge over the rest of the market.

Users of the service can top up their Amazon accounts by handing over cash at certain physical locations of partner retailers. Though easy and convenient, this service is not unique in the market, being similar to PayPal My Cash Card (and prepaid cards generally).

The target market for this new service is large: more than a quarter of consumers (27%) are still unbanked or underbanked in the US according to the FDIC National Survey of Unbanked and Underbanked Households in America. Furthermore, according to GlobalData’s latest report on consumer payments in the US, cash still dominates lower-value transactions.

In 2015, the average value of cash transactions in the US was $13, and the Federal Reserve Bank of San Francisco reported that cash was used for around half of all transactions below $50. Our Payment Instrument Analytics highlights that in 2015 cash payment transactions accounted for over a quarter of the total number of transactions at the point of sale. By opening up its online store to accept cash (by proxy), Amazon Cash extends the retailer’s reach to those Americans who remain heavy cash users.

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Amazon Cash is easy to use, requiring consumers only to download or print the barcode and then go to certain retailers to top up. Consumers can add between $15 and $500 to their Amazon accounts in this way. The funds are added into the account immediately and can be used for any purchases on the Amazon website. There is no fee to use Amazon Cash, which gives it an advantage over prepaid cards; such cards are very popular in America (37% of US consumers held a prepaid card in 2015) but charge regular fees to holders.

To boost sales and market take-up, Amazon is currently offering $10 digital credit (which can be spent on Kindle e-books and music downloads, among other products) to users who top up $50 with Amazon Cash.