Banks have long been in the business of cashing their own checks. Recently, however, banks are starting to offer less traditional check cashing services. To tap into the lucrative business of check cashing outlets, banks are creating fee-based services that allow individuals to cash checks before they clear. Sound familiar? That’s because banks are now vying to compete with check cashers.
The Associated Press reports that banks are diversifying their strategy to capture the “want it now” attitude of consumers. Banks are hoping to capture business beyond low income families. Fifth Third Bank is now offering “Express Banking,” a check cashing service with a sliding fee scale. The fees range from 1-4% and are lower for individuals who are more active with Fifth Third Bank.
This approach allows the bank to serve their existing clients at a lower fee, while accommodating walk-ins with check cashing services. For a $500 check, the 1% fee places the Fifth Third Bank fee above national check casher Walmart. Unlike Walmart, Fifth Third Bank accepts personal checks. More and more banks are entering the check cashing arena in an effort to add to their fee-based revenue. CBS notes that banks are hoping to scoop up new customers and compete with the check cashing outlets who dominate the check cashing industry.
For banks, check cashing services are viewed as a way to tap into the “impulse buy” phenomenon. When a customer is depositing their check through an ATM or a teller, they will be offered two options: wait the standard 24 or 48 hours for their funds or receive instant access to their funds for a fee. Banks are betting that they can convert a percentage of their existing clients into check cashing clients.
At the same time, banks are hoping to capture new clients, clients who typically use a check cashing outlet for their financial service needs. This expanded strategy comes at a time when banks are cashing fewer checks. Even though traditional banking clients have fewer checks to cash, the alternative financial services industry is booming. As banks add check cashing services, another trend is developing. Banks are now closing their check cashing bank accounts at unprecedented rates.
As banks add check cashing to their service offerings, they are competing with local check cashing services. Local check cashing services include stand alone check cashers, commercial check cashers, and retail check cashers. Many check cashing operators (CCOs) gain business through their high-traffic locations.
CCOs are working to build their clientele through loyalty programs and special offers. These programs encourage repeat business in an industry where many customers only frequent a business once and use a new CCO each time they need to cash a check. Check cashers are using their existing customer data to create valuable programs that keep clients coming back for more. As banks begin to compete with CCOs, it is important for local check cashing services to differentiate themselves from traditional banks.
Retail check cashers, in particular, are poised to compete with banks. A wide variety of businesses offer retail check cashing services, including: convenience stores, gas stations, restaurants, liquor stores, beauty shops, grocery stores, and bodegas. Convenience store check cashing, for example, offers financial services to community members where they already shop for small household items, tobacco, food, and beverages.
In one visit to a CCO, an individual can cash their payroll check, pay bills, load a prepaid debit card, and send money to relatives. This convenience and range of services is helping retail check cashers, CCOs, and MSBs stay competitive as banks enter their financial services market.
As check cashers compete with banks and work to grow their businesses, they need supported MSB services, including an MSB bank account. Without a reliable banking relationship and efficient services, check cashers can’t serve their communities with local check cashing services. Unfortunately, banks are closing down MSB bank accounts for a few different reasons. First, MSBs and check cashers now represent direct competition for banks who offer check cashing services. Second, the indiscriminate derisking trend continues.
Indiscriminate derisking occurs when banks shed risk by closing check cashing bank accounts as a result of the perceived riskiness of the MSB industry. This trend was ignited in part by Operation Choke Point (OCP). The list of risky businesses published by FinCEN, now named Operation Choke Point, named MSBs as high risk clients for banks. As a result, banks now have ammunition for closing these accounts in the name of compliance. Even though FinCEn has since retracted this list, the ramifications are still felt throughout the check cashing industry.
Since MSB friendly banking is harder and harder to find, check cashers are more anxious than ever before about losing access to their bank accounts. In addition to securing a bank account, check cashers need armored cash transportation, fast deposit turnaround, and services that support the efficiency of their business. Since financial crimes are a threat to check cashers, a robust compliance program is also necessary. Check cashing software, like advanced POS systems, help free up valuable time that check cashers can use to focus on their customers and growing their business.
Of all of the necessary MSB services, MSB banking is the most essential. Friendly check cashing banks are hard to find for the reasons we discussed above. Check cashing business owners often turn to National Check and Currency after losing their longtime check cashing bank account. NCC keeps them up and running with a network of redundant check cashing banks. What does this mean? NCC has built a team of banks that provide reliable bank accounts for check cashers.
Check cashers who become clients of NCC no longer have to worry about indiscriminate derisking. Your business can focus on the check cashing process, recruiting new customers, and diversifying your check cashing services. This peace of mind is only available through redundant financial partners. In addition to a real MSB bank account, you will enjoy supported MSB services like extended deposit times, armored truck cash delivery, and wire transfer capabilities. These services work together to help you build an efficient and profitable check cashing business. How could you expand your retail check cashing services with NCC on your side?