MSB Insider

How Prepaid Cards Fit Into the Check Cashing Industry

October 18, 2017

Prepaid cards offer a financial solution for individuals who don’t have a bank account or who are looking for new ways to budget. This alternative banking card is reloadable and allows you to spend the money that’s on the card at stores or any place where you would use a credit or debit card. Prepaid cards can also be used to withdraw money from an ATM. Every prepaid card is backed by a transaction account held by a bank. In some cases, you may link the prepaid card to a checking account to transfer money, but in most cases the card is used independently from a bank account.

Who Uses Prepaid Cards?

You can open a prepaid card without a credit check or bank account. For this reason, prepaid cards are the financial tool of choice for the unbanked, underbanked, and those working to rebuild their credit. Individuals with access to traditional banking services also turn to prepaid cards to help budget and save. Since you can’t physically spend more than is loaded on the card, they are a great tool for effectively managing your finances. There is no threat of overdraft fees because it’s impossible to surpass the spending limit imposed by the card balance.

Many families used prepaid cards for their teens to manage monthly allowance. Unlike with a credit card, a teen can’t rack up a huge bill on a prepaid card. Since they pose no threat to your credit, prepaid cards also don’t build your credit. Individuals looking to build credit should research their secured credit card options.

While prepaid cards are a necessity for the unbanked, they offer convenience to all of their users, even those with traditional bank accounts, debit cards, and credit cards. Prepaid cards are an important alternative financial service that fill a gap in the banking industry. Most importantly, prepaid cards offer financial inclusion for the unbanked and underbanked.

How Do Prepaid Cards Work?

With prepaid cards, you pay before you ever swipe the card. You load money onto the card using cash or other funds. When you use the card to pay for goods and services, the money is simply deducted from the card balance. With a debit card, you pay at the time of the transaction and money is debited straight from your checking account. With a credit card, you pay after the transaction when your bill is due. A prepaid card is your only option for paying before the transaction.

You can purchase and load a prepaid card from a retailer, check casher, or bank. While every prepaid card offers a slightly different experience, these features are the most common:

  1. Reloadable: prepaid cards are reloadable. You put money on the card, spend money, and then reload with more money.
  2. ATM Access: many prepaid cards offer ATM access, allowing you to withdraw cash from the card balance.
  3. Account Limits: many prepaid cards have set account limits that determine how much you can reload and withdraw from the card in a certain time frame.
  4. Fees: many prepaid cards have activation fees, monthly fees, and fees for making deposits or using out-of-network ATMs.
  5. Expiration: prepaid cards have an expiration date like any other card in your wallet. While you will need to get a new card, your funds never expire and can be transferred to the new card.
  6. Extras: some prepaid cards offer extras like online bill pay, multiple copies of a card (for families), and even rewards programs.

If you are in the market for a prepaid card, you should carefully evaluate your options and choose a card with features that match your needs and budget. It’s important to also note the potential downside of prepaid cards. RushCard and Walmart Money Card are two prepaid card companies that have recently experienced network outages. During these outages, prepaid card holders lost access to their funds for days.

Beyond potential outages, many prepaid cards are missing essential banking functions. For individuals without a bank account, it may still be necessary to piece together additional alternative financial services to pay bills and manage your complete financial picture.

Prepaid Card Regulation

The Consumer Financial Protection Bureau issued their final ruling on prepaid accounts in October 2016. The rules, which go into effect in April 2018, will give prepaid card users federal protections similar to debit and credit card accounts. The new rules require simply and upfront disclosures of all associated fees and features of the prepaid card. They also give prepaid card users the ability to dispute transactions and offer protection against fraudulent charges.

Under the new rules, prepaid card issuers must ask the user up front if they want to opt-in to services allowing them to borrow money. If they opt-in, any potential overdraft fees must be reasonable and explained to the user in clear terms. In essence, the new rules aim to increase transparency and safety for prepaid cards. Critics of the rules point out that the requirements lump all kinds of prepaid debit cards (those with vastly different services, fees, purposes, etc.) into one group. Others assert that the rules are altogether unnecessary, solving a problem that simply doesn’t exist. Attempts to block the ruling from going into effect were blocked in 2017.

Check Cashing Services

Prepaid debit cards are an integral part of any suite of check cashing services. Other popular services include convenient bill pay, money transfer, and of course, check cashing! How does the prepaid debit card fit into the picture? Most often, a check cashing customer will cash their paycheck at a check cashing outlet and then reload their prepaid card. This card can then be used to run every day errands, pay for groceries, fill up the tank with gas, and more. When used in conjunction with check cashing, the prepaid card allows the customer to completely circumvent a traditional bank.

Since banking access is expensive and reserved for those with higher incomes and better credit, these services fill a serious gap in financial services. In this way, prepaid cards promote financial inclusion and improve the lives of those who need them.

National Check and Currency supports check cashers with real business bank accounts, expert compliance guidance, and state of the art technology. NCC also provides nationwide cash logistics so that check cashers can effectively rotate their working capital. This allows check cashers to focus on serving their customers with services, like prepaid cards.


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FinTech, Big Data, and AML Compliance for MSBs

October 11, 2017

Big Data and FinTech are giving the money service business industry more tools than ever before to serve their customers while shoring up their compliance risk. MSB regulation now spans the globe and financial institutions across the world juggle regulations that vary from jurisdiction to jurisdiction. Varying regulation, massive amounts of data, and a lack of communication create an environment of confusion and reaction. Harnessing big data and FinTech to gather, organize and analyze data empowers the MSB industry to stay in control when it comes to compliance.

Efficiently using technology to identify issues and communicate these issues will streamline compliance programs and bring a new level of transparency to MSB operations. Know Your Customer (KYC) requires MSBs to gather data and now the industry has even more incentive than ever before to put this data to work.

Rise of Big Data

Big Data is defined as “extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.” We take part in (and our actions become) Big Data every single day. You create data with every swipe of your card at the grocery store, every second spent on your smartphone, and through every banking transaction. Every digital touchpoint generates more data. And this data is used by companies to improve the user experience, gain insight into consumer behavior, and inform major decisions.

Banks and MSBs are using Big Data to boost security, increase compliance, cultivate customer loyalty, create personalized offerings to individualize experiences, reach new customers, and retain existing customers. The financial world as we know it today is driven by Big Data. Many people now consider banks technology companies. Think about it. Your bank uses technology to create your entire experience.

Online banking, automated ATMs, and mobile apps are the cornerstone of the modern banking relationship. At every point, data is collected. This data becomes a part of Big Data and is used to make additional business decisions regarding your banking experience. Every ATM location, mobile app update, and online banking service is carefully crafted using Big Data. In the financial services and MSB industries, Big Data is considered the future of compliance and fraud prevention.

FinTech Revolution

FinTech has been around since the dawn of the financial services industry. FinTech refers to anywhere technology is applied to financial services. This includes helping businesses manage financial tasks through software, applications, processes, and business models. In the world of money service businesses and banks, FinTech is often applied to help financial institutions manage customer interactions, facilitate payments, and improve compliance. Since the 2009 economic downturn, FinTech has become more disruptive. Startups and tech companies are vying for the attention of consumers and businesses alike.

FinTech is also emerging as a compliance powerhouse in the wake of the Great Recession, which marked a boom in financial regulation. FinTech was originally considered more a back-end data-management system.  Peer-to-peer payment platforms have put FinTech in the spotlight as an end-to-end system. No matter the use, FinTech continues to reshape and evolve alongside the financial services industry. E-commerce, global payments, and even cryptocurrencies are examples of the disruptive power of FinTech.

FinTech, Data, and AML Regulation

Big Data and FinTech are the key for effective compliance and risk prevention. Anti-Money Laundering (AML) regulation is similar to FinTech in that it’s been around for a while. After the 9/11 terrorist attacks in 2001, the USA PATRIOT Act amended previous AML requirements set forth by the Bank Secrecy Act of 1970. The revise requirements were designed to encourage cooperation and communication between financial institutions, law enforcement agencies, and regulators.

In order to fight financial crimes like terrorist financing, clear and constant communication is key. Compliance experts rely on data to identify and halt illicit activity. With the amount of data generated by every transaction, the databases are unwieldy. FinTech allows us to efficiently process Big Data while eliminating human errors. The result? MSBs and banks are able to stay ahead of the criminals.

Outside of the MSB industry, financial institutions and lenders are using data to spot red flags. For example, online lenders are checking the IP addresses of loan applicants. If the applicant states that their home address is in New York, but their IP address is in South America, the application is flagged. When FinTech and Big Data work together, they can help humans catch inconsistencies and anomalies before they become full blown financial fraud.

As FinTech continues to grow, the focus is now on collaboration over competition. There is room for startups to work alongside established players to improve the financial services industry. For MSBs, the applications of FinTech and Big Data will continue to grow.

Innovations for Money Service Businesses

Money Service Businesses are currently benefiting from additional innovations. POS technology enables MSBs to capture all of the necessary data points for every check cashing transaction. This data is then checked against a database, recorded, and, if necessary, reported. Beyond the individual transaction, MSBs also enjoy improved cash logistics.

NCC just launched nationwide cash logistics serving all locations in the United States accessible by the USPS. The service is made possible through NCC’s partnership with TransGuardian and Rapid Armour. Any MSB location in the US can send and receive funds via the USPS. This means that MSBs can rotate their working capital, sending cash for deposit to their financial institution or receiving cash from deposits at their MSB location.

NCC’s team of MSB and compliance experts stays on top of all financial trends and pending regulatory changes. NC sets up all of their clients with cutting edge technology so that they can take advantage of FinTech and Big Data to safeguard their business against fraud. Improved data brings improved compliance and governance to all of your MSB locations. In the case of an audit, organized data collection protects your business.

If you are ready to enjoy your own MSB bank account and supported MSB services, reach out to NCC via phone or online form from right here on the website.


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Check Cashers Scramble to Comply

October 05, 2017

The latest Thomson Reuters Anti-Money Laundering Insights Report reveals that new AML regulation is overwhelming the check cashing and money service business industry. While most check cashers fear compliance, only 62% of AML professionals are confident that their organizations can meet new regulations that will go into effect under FinCEN in 2018.

Current Compliance Goals

Know Your Customer (KYC) guidelines are designed to help check cashers and financial institutions identify financial criminals. KYC hinges on gathering accurate data for every new customer that enters your check cashing business. Since money launderers and criminals typically try to disguise their true identity, they often use accounts opened by associates. This type of behavior makes identifying and tracking criminals a challenge.

Even with these barriers, 89% of organizations can accurately identify ultimate beneficial ownership (UBO) information. About 58% of these organizations still note that the inability to verify UBO data is their greatest operational hurdle. In order to collect and verify adequate data, AML experts are hoping to improve data management, increase data quality, invest in new technology solutions, automate their processes, and train their employees.

Filing Suspicious Activity Reports (SARs) is a key part of any compliance program. Out of all organizations filing reports, roughly three quarters of them have no idea whether their reports are false negatives or false positives. Without this information, they can’t fully understand the successes and failures of their compliance programs. The lack of communication outside of regulatory rules is partly responsible for the fear of check cashers over noncompliance.

Machine Learning and Check Cashing Compliance

Good data is the key to increased compliance. Gathering data on check cashing customers is no small task. Everything from personal identity to transactional details must be recorded, checked against massive databases, reported on, and stored for future reference. Check cashers must rely on POS technology, systems automation, and strict check cashing processes to gather all necessary data points.

Once the data is collected, what do you do with it? BSA requirements govern record keeping and reporting. Outside of these obligations, the data continues to pile up for your business. Machine learning allows compliance professionals to analyze data and learn from every customer interaction. In this situation, the computer continues to learn how to detect anomalies in the data and continues to improve its accuracy in identifying fraud. Since criminals are always inventing new workarounds, it can be difficult (impossible) for humans to keep up. Machine learning helps check cashers stay ahead of the criminals.

Check Cashing Regulation

Check cashing regulation is also working to stay ahead of criminal activity. The Financial Crimes Enforcement Network (FinCEN) is the bureau of the U.S. Department of the Treasury responsible for combatting financial crime. FinCEN works to protect the financial system from illicit activity. According to their website, the bureau “combat[s] money laundering and promotes national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”

All licensed money service businesses and check cashers must register with FinCEN in order to operate legally in their area. Unlicensed check cashers who cash less than $1,000 per day per customer are not required by law to register. It is still in their best interest, however, to remain compliant and reduce their risk for fraud.

The Currency and Financial Transactions Reporting Act of 1970 gives FinCEN the power to act in a regulatory function. The USA PATRIOT Act of 2001 and the Bank Secrecy Act further amend FinCEN’s role into the regulatory authority it is today. Check cashers rely on FinCEN to hand down regulations and compliance guidelines. When FinCEN issues a new order, check cashers often scramble to comply in time. In some cases, entire business processes need to be reworked in order to meet new requirements.

Part of the value NCC provides to their clients is the ability to stay ahead of the curve when it comes to new regulation. NCC’s experts stay up to date on all current and pending regulations. When the time comes to implement new regulation, NCC is there to ensure a smooth transition.

NCC’s Check Cashing Services

NCC offers a variety of banking and logistics services for check cashers. For starters, NCC offers real check cashing business bank accounts. Every account is reliably backed by an entire network of check cashing friendly banks. This means that even if one bank decides to engage in derisking, there is another bank ready to accept that account. This model does not exist anywhere else in the check cashing industry.

In addition to real bank accounts, NCC offers a team of MSB compliance experts. This team will support you in the development of a robust and effective compliance program. NCC tracks trends and regulatory chances for you. When the time comes, NCC rolls out new technology and protocols to keep you compliant and always operating within the scope of the law. The entire support team at NCC is available 24/7 to assist you whenever you may need it. When surprises and hurdles arise, NCC works tirelessly to keep your business up and running.

NCC offers advanced technology, including POS systems, to support your compliance program. As discussed above, effective use of technology is your best chance to catch financial crime before it enters your business. These systems also streamline your business operations and reduce human error. NCC trains their clients on the use of systems and will help you develop check cashing processes and business procedures.

After a bank account and a compliance program, cash logistics is the most important part of your check cashing business. NCC offers armored cash delivery in select markets across the United States and now nationwide cash logistics via the USPS. This means that any check cashing outlet can send and receive cash to and from their operating account or financial institution. The nationwide service is made possible through a partnership with TransGuardian and Rapid Armour.

Extended deposit times and rapid rotation of your working capital are additional reasons that check cashers choose to work with NCC. As banks continue to shed risk and financial criminals become more savvy, it’s important to have a strong ally for compliance. The efficient systems and support are added bonuses that help your business run smoothly.


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Available 24/7

Our first priority is to keep our customers banked and processing items. Our partnership with multiple MSB-friendly Financial Institutions allows us to meet that goal. If you have questions about establishing a new MSB bank account relationship, or would like help with your current account, please feel free to either e-mail or call us. 24 hours a day. 7 days a week

The MSB Insider

How Prepaid Cards Fit Into the Check Cashing Industry

Prepaid cards offer a financial solution for individuals who don’t have a bank account or who are looking for new ways to budget. This alternative banking card is reloadable and allows you to spend the money that’s on the card at ...(read full article)

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