Inside the Check Cashing Community

February 23, 2017

The check cashing industry is often misunderstood by people who think banks are better suited to meet financial needs. Those who misunderstand the industry are overlooking the key issues that deny open access to banks.
Traditional banking is beneficial for those who have access to it, bestowing them with checking accounts, investment portfolios, retirement savings plans, mortgages, and so much more. For the other half, however, maintenance fees, a lack of transparency, and the decline in personal service keep them away from the traditional banking system.
This is where check cashers step in to close the financial inclusion gap. By granting access to financial services, check cashers play a vital role in their communities and in the banking economy as a whole.
While bank account holders might still turn up their noses at check cashing fees, they are missing the glaring truth: these fees are often less expensive than hidden bank fees for people without a high net worth.

How People Use Check Cashing Services

Lisa Servon, a University of Pennsylvania professor, recently took a job as a teller at a check cashing outlet. Her goal, fueled by her research in the area, was to understand why individuals use check cashing services. Lisa discovered that people choose check cashers over banks for three primary reasons: transparency, service, and cost.
Her instincts told her that policy makers and banks were wrong about a need for better education. Instead of heading the call to usher the unbanked into the financial future, Lisa set out to unearth their decision making process.
What she found is that unbanked and underbanked individuals are making logical decisions based on their financial position. In her new book, The Unbanking of America: How the New Middle Class Survives, Servon notes that the people she served as a teller did not seem to be naive or reckless with their finances. They were making the best decision based on their financial situation.
In the US, approximately 7% of households are unbanked, while 20% are underbanked. This represents a significant portion of the population that is turning to alternative financial services, like check cashing services, for their household needs. In a recent NPR interview, Servon discusses her discoveries from her time as a check cashing teller.
She was surprised to learn that check cashers have loyal, repeat customers who often tip for their services. Lisa tried to refuse a tip from a customer, but the customer insisted saying they wanted to pay for the personal and convenient service. Her contacts at the Oakland check cashing outlet where she worked tell Lisa that many of her customers are still regulars at the location.

The Check Cashing Industry Bridges The Gap

As Servon learned, check cashers play a pivotal role in their neighborhoods. Retail check cashing services go a step further to provide financial services where customers are already shopping or spending money on services. In additional to retail check cashers, stand alone check cashing outlets and commercial check cashers also play a role in the alternative financial services economy.
For check cashers, the three factors that lead individuals to use their services are important for business success. By focusing on transparency, cost, and personal service, check cashers can encourage repeat business and nurture customer loyalty. In addition to paycheck cashing, check cashers can offer additional services like quick bill pay, prepaid debit cards, money transfer, money orders, and short term loans. Each of these financial products grants access to those who do not enjoy the privilege of financial inclusion.
Retail check cashers, in particular can use alternative financial services to grow their businesses into hubs of community activity and engagement. Convenience store check cashing is the most familiar of retail check cashing outlets. The industry also includes grocery stores, bodges, gas stations, restaurants, beauty shops, and liquor stores. Each of these retail businesses uses POS check cashing technology to offer financial services to their customers in the same location as their primary business.
By meeting the demand for check cashing services, retail check cashers can grow their businesses through fee-based revenue. This helps them diversify their business offerings and tap into a lucrative market. Since the retail businesses already have a physical location, the initial investment centers around the check cashing system and compliance measures. Business owners who are unfamiliar with the check cashing industry should rely on experts to build a compliant, efficient, and profitable check cashing business.

Moving Check Cashers Forward

As check cashers work to offer financial services for the unbanked and underbanked households in the United States, they are facing their own setbacks. Primarily, a lack of access to reliable check cashing bank accounts is plaguing the industry. Since check cashers rely on bank accounts to move money through their system (depositing the check, handing the customer cash, on repeat), this is a crippling trend.
As a result of regulation and misunderstanding about the nature of check cashing, banks are terminating their check cashing accounts. This indiscriminate derisking is hitting check cashers, and the businesses and individuals they serve. One of the unintended consequences of check cashing regulation is that compliant check cashers are forced to close their doors.
Since many retail check cashers are unregulated, they are not subject to the same regulation as regulated MSBs and check cashers. Any check casher who cashes less than $1,000 per day per customer falls into the unregulated category. Check cashers who cash more than $1,000 per day per customer fall into the regulated category. All businesses offering friendly check cashing services, even unregulated ones, should take a comprehensive approach to compliance in order to reduce fraud. By taking your compliance seriously, you will have more opportunities to work with check cashing friendly banks.
NCC works with both types of check cashers to keep them banked through a network of financial partners. How does NCC secure banking relationships in this tough landscape? NCC is committed to working with only the most compliant check cashers. As a result, both the check cashers and the banks who work with them enjoy a mutually beneficial relationship.
To gain access to this network of check cashing banks – and to secure your own check cashing bank account – you can become an NCC client. To do this, you simply need to call 877-327-4249 or fill out the “Open An Account Today” form on our homepage.

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