MSB services enable your small business to serve the underbanked.As a money service business or check casher, you are playing a vital role in your local economy. Regulators and politicians perpetuate the idea that nontraditional financial and MSB services “prey” on the impoverished. When they wax poetic on the topic, they overlook the demand (and real need) for these MSB services. MSB services bridge the gap for those who do not have access to a traditional checking account or a line of credit.
When rent is due one day before you receive your paycheck, the interest on a payday loan pales in comparison to steep bank overdraft fees or the real consequences of missing a rent payment. Across the United States and the world, MSB services are the missing link for millions of households without access to a traditional bank account.
Case Study: Mobile Money in Kenya
Alternative financial service providers encourage financial inclusion through convenience and access to financial MSB services. MIT economist Tavneet Suri studied the impact of mobile-money services in Kenya and found that these nontraditional banking services lift people out of poverty. In Kenya, the majority of the population does not have access to a banking system. This vacuum of financial services hinders economic growth and oppresses the poorest members of the population.
Since mobile money service MPESA came onto the scene in 2007, over 25 million Kenyans have started using the service. Mobile money services have exploded in Kenya and Suri’s research shows that the MSB services are actively improving the economy on both a macroeconomic level and a microeconomic or household level. In his MIT study, Suri found that households with access to mobile money experienced a 6% increase in per capita consumption, bringing roughly 4% of households in the average sample above the poverty line.
Among female-headed households, the results were even more drastic with an 18.5% increase in per capita consumption and reducing poverty by 9.2%. The researchers extrapolated these numbers to predict that access to MPESA has helped raise 194,000 Kenyan households out of poverty. The study shows that alternative financial services and innovation can make a significant impact on the impoverished populations of the world.
MSB Services in the United States
In the United States, alternative financial and MSB services help those without access to a bank. According to a 2015 FDIC survey, approximately 7% of total US households lack access to traditional banking services. This amounts to 9 million American households who need alternative financial services to run their daily lives. Even though the Treasury Department has made financial inclusion a priority, it is still not the reality for a large chunk of our population.
MSB banking services can include paycheck cashing, business check cashing, bill pay, wire transfer, money transfer, and prepaid debit cards. Each service is designed to meet a specific need: cash a check without a bank account, pay your bills without a checkbook, send money to friends or family, and load a card with money to use for daily errands and expenses. Retail check cashers and stand-alone check cashing outlets choose services that reflect the needs (and demand) in their community.
Trends for MSB Services in 2017
In the year ahead, AML regulators will crack down on certain MSB services like prepaid debit cards. This is a result of their continued focus on customer due diligence (CDD), including the requirement that alternative financial institutions implement CDD for their highest risk products. Some argue that this ever-tightening regulation is forcing alternative financial services providers to act as law enforcement by proxy. No matter what, however, this trend is adding the AML responsibilities of money service businesses and check cashers alike.
Outside of the United States, money service business in both the Caribbean and Canada are reeling from account closures. In Canada, MSBs are reporting a “sector-wide sweep,” with widespread MSB bank account termination. Money service businesses that are completely compliant with AML laws are blindsided when their banks send them notification of account closure. The trend is shaking the MSB industry to its core and leaving small business owners scrambling to find a solution.
In the Caribbean, money service businesses, banks, and elected officials are working to solve the “derisking crisis.” Most Caribbean financial institutions maintain correspondent banks in the United States so that they can easily trade currencies to conduct business in US Dollars. Amidst increasing AML pressure, these correspondent banks are severing ties with financial service providers in the Caribbean.
Issues in Canada and the Caribbean highlight the global regulatory conundrum of derisking. Money service businesses and check cashers in the US are also facing bank account termination. The length and quality of your banking relationships does not exclude your MSB from the threat of derisking. MSB owners with 20 plus year banking relationships are receiving 30-day account termination letters with zero explanation. In the face of this trend, securing an MSB bank account that allows you to provide valuable MSB services is more difficult than ever before.
How NCC Supports You with Supported MSB Services
National Check and Currency solves your banking problems by providing real MSB bank accounts for check cashing businesses. NCC’s network of redundant financial partners provides an additional layer of insurance against derisking. Furthermore, the NCC team is comprised of MSB banking, MSB compliance, and check cashing industry experts. Clients enjoy 24/7 support and invaluable insight into the check cashing industry.
Additional services include armored cash transportation, extended weekend deposit cut-offs, and ACH capabilities for faster rotation of your working capital. Advanced POS technology and training on the check cashing process help you vet customers and stay compliant. These efforts protect your business from fraud and regulatory violations. With NCC on your side, you can focus on keeping your customers happy and growing your check cashing business.
If you are ready to apply for your MSB bank account, fill out a form or call NCC today.