Mobile Money and Check Cashing Businesses

April 06, 2017

As FinTech startups vie for space in your mobile wallet, some are looking forward to a cashless future. But peer to peer payment apps won’t fill the void in banking services. Many of these platforms, like Venmo and PayPal, still require a bank account or credit card for all users. These services don’t cash pay checks or load prepaid cards. This keeps P2P apps out of the hands of the unbanked. As mobile money options expand, check cashers are keeping pace with a few tricks of their own.

The Rise of Mobile Money

Mobile money addresses two concerns: convenience and access to financial services. Many of the mobile money platforms we are familiar with primarily address convenience. For example, roommates Venmo each other to split bills and parents PayPal their babysitter. Another crop of mobile money start-ups seeks to reach the unbanked.
The rise of mobile money is fueled in part by the inaccessibility of traditional banking. Of the 37 million adults in the US without a bank account, two thirds are millennials or gen-x. Lower income households tend to be unbanked and this younger group is 3 times more likely to be unemployed. These factors create a pool of unbanked, tech savvy millennials searching for a solution to their banking woes.
In the US, T-Mobile is rolling out their new Mobile Money service aimed at this unbanked population. Together with their banking partner, Bancor, T-Mobile’s solution uses both a smartphone and a prepaid Visa cards to offer financial services like check cashing, bill pay, and ATM withdrawals. T-Mobile is not looking to create an electronic wallet. Instead, they are hoping the program will drive customer loyalty and bring financial services to those who don’t have access to traditional banking.
Unfortunately, T-Mobile is making accusations about check cashing fees that are untrue. T-Mobile asserts that they are offering Mobile Money to help people avoid costly fees for alternative banking products. Check cashing fees are capped around 2%, while bank fees are often flat (or the highest between the flat fee and the percent). Check cashing outlets and retail check cashers are offering a different range of services through face to face interactions. Both check cashing and mobile money are offering banking services at a lower cost to the unbanked than they could receive walking into a bank branch.
T-Mobile’s plan is nothing new. In fact, they are taking a page out of the playbook of mobile money companies operating abroad. M-PESA started in Kenya 10 years ago and now more than half of the population uses the service. M-PESA’s concept for running a banking service entirely through your phone was novel for its time back in 2006. In Kenya, where banks are scarce and unreliable at best, the need for reliable banking became a national emergency.
Vodafone launched M-PESA to solve this issue and offer a way to avoid bank queues or long walks to the train station, where you were inevitably bribed to ensure your safe delivery of funds. Now, companies around the world are following this model to close the gap in financial inclusion and offer convenience to banked customers. M-PESA is a financial inclusion success story and research shows that the service is helping alleviate poverty in Kenya.

Check Cashing Businesses Hold the Market

As the financial industry buzzes about mobile money, check cashing businesses are quietly holding down their communities. In locations without bank branches, check cashers are filling a physical void in banking services. Unlike most mobile money services, check cashers offer a complete line up of complementary services such as: bill pay, payroll check cashing, prepaid debit cards, money transfer, money wire, currency exchange, and traveler’s checks.
Check cashers also offer loyalty programs and foster one on one banking relationships with their customers. In a work of smartphones and ATMs, many crave this personalized approach to financial services. Retail check cashers offer another layer of convenience by offering financial services in addition to their core business offering.  Retail check cashers include restaurants, grocery stores, bodegas, convenience stores, gas stations, liquor stores, and beauty shops.
Convenience store check cashers are mainstays in their communities, offering light bites, beverages, household products, and financial services. It doesn’t get much more convenient than this. Other retail check cashers bundle unique, but integral services together to offer a one stop shop solution for their clients. By bundling services, retail check cashers expand their reach and drive foot traffic to their business location. There is also an opportunity for cross-promotion to encourage customers to shop where they are cashing their checks.
Of course, check cashers are facing their own set of obstacles, namely derisking. In order to reduce their regulatory burden and risk for financial fraud, many big banks are closing MSB accounts – or eliminating their MSB banking departments entirely. This act of derisking leaves check cashers vulnerable – and potentially bank-less. Even check cashers who remain compliant and transparent are not immune to the threat of derisking. For check cashers, a written 30 day notice is the only explanation they receive for their bank account termination.
Implementing a robust compliance system is, however, still essential for securing a reliable check cashing business bank account. While many banks are opting out of risk, the risk associated with check cashing can be effectively managed through smart compliance programs. In addition to derisking, check cashers are working to diversify their products and increase customer loyalty to head off increased competition from banks and mobile money services.

Solutions for Check Cashing Businesses

For check cashers looking to compete with mobile money, a reliable check cashing business bank account is the first step. Without a reliable bank account, you could be left scrambling or even have to shut down your business. NCC provides reliable bank accounts for check cashers, both licensed and unlicensed. Every bank account is backed by NCC’s network of financial partners, which protects you from derisking.
NCC also supports check cashers through the development and maintenance of robust compliance systems. On the front end, NCC’s check cashing industry experts will help you understand and evaluate your needs. Every NCC client receives a state of the art POS check cashing system to gather customer data, check data against database, and communicate with banking partners. This check cashing technology allows you to identify check cashing red flags before they become fraud. These solutions help check cashers run efficient and compliant businesses – and free up time to focus on client retention and growth.
NCC also improves cash flow through extended deposit times and quick deposit turnaround. Check cashing funds are available in 24 hours or less and customer support is offered around the clock. Armored cash transportation and vault services are available in select major markets for another layer of benefits. Many clients turn to NCC after learning that their bank account is going to be terminated. Why wait? You can start enjoying these services, plus the peace of mind, today by filling out an “Open an Account” form online.

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