The check-cashing industry is a profitable and rapidly growing business.
The no-hassle atmosphere and easily accessible financial services it offers
are an attractive option to a growing number of customers.
Check-cashing outlets cash an estimated $60 billion in checks each year
in the U.S. alone. That's according to the Financial Service Centers of America,
That's considerably more than just a few decades ago.
Check-cashing outlets cash checks for a fee. Most offer other financial
services as well. One of the most popular is deferred deposit, also known
as "payday lending." This is the practice of giving a short-term loan for
a fee, while holding the customer's post-dated check for deposit at a later
date, usually in about two weeks.
Other services include wire transfers, phone cards, money orders and currency
Most of the clientele are in the lower-income bracket. Many of these customers
cannot afford to maintain a checking account because of minimum balance requirements
or high bank fees.
The main reasons for the industry's rapid growth include:
- Bank branch closings, especially in low-income and minority neighborhoods
- Larger numbers of households with lower incomes
- High bank fees
- Increased credit card debt and bankruptcies
The check-cashing business is a niche business, says Mike Regimbal. He
is the director of operational support for a large check-cashing company.
He was attracted to this line of work because of the variety and the challenge.
"Because the industry is so new and growing so quickly, employees and managers
are challenged to 'write the book' and invent the business as they go," says
Regimbal. "Typically, problem solving is not bound by status quo or industry
"One must be creative, open-minded and inventive in getting the job done
and building the business. This business comes with challenge, autonomy and
the ability to really make a difference.
"The nature of the work attracts problem solvers, those with street smarts,
who are willing to accept risks and grow. There has been a lot of career opportunity
because of the growth of the business," he says.
Ed Phillips is the branch manager of a check-cashing business. "When I
retired as a banker, I needed something to better occupy my time. [I] can't
golf every day!" he says.
"An acquaintance of mine approached me with the idea of establishing a
new payroll loan branch....This was quite a new experience to me. I was not
aware that such a market niche existed. But I agreed to do so three years
ago. Since then, the branch has grown."
Phillips is able to use his banking knowledge to better serve his customers.
"There is approximately a 30 percent turnover of clients. I have used my banking
background to counsel my clients in financial prudence. And some have graduated
to mainstream banking connections," he says.
Phillips notes that it's not an industry for someone without "deep pockets."
Profits can be good, but write-offs are common and must be factored into the
business plan, he adds.
Hank Shyne is the executive director of FiSCA. He says that, just as in
real estate, business productivity has everything to do with location, location,
Some chains are quite large, with over 1,000 stores. Some are just single
mom-and-pop outlets. Profits vary considerably, depending upon such factors
as state fee regulations and volume of customers. The average store typically
has about three employees, and usually the entrepreneur is one of them, says
Shyne warns of the challenges of the business. "It is a difficult business
with long hours. It's dangerous, because the commodity is cash. Many are open
six days a week."
There are two major trends influencing the check-cashing industry today,
says Rebecca Marion. She is the senior account executive for FiSCA's marketing
The first major trend is the partnerships developing between banks and
After years of chasing higher-income customers, banks and credit unions
are realizing that lower- and middle-income communities can be profitable.
"Check cashers have proven that point as capable entrepreneurs," Marion says.
The Community Reinvestment Act (CRA) of 1977 requires banks and credit
unions to serve low- and middle-income communities. Partnering with check
cashers is a convenient way for banks to offer middle- and low-income consumers
"Check cashers already have the store locations, the employees, etc. --
basically all the high overhead costs of business," Marion explains. "Partnerships
with check cashers allow banks and credit unions to make a profit and meet
their obligation under the CRA.
"Similarly, check cashers benefit from these partnerships because they
are able to offer a greater span of services to consumers that they could
not do on their own."
A second driving trend for the check-cashing industry is the use of technology.
"There have been a handful of developers of automated check-cashing machines
that will begin to influence the industry," says Marion.
These machines decrease operating costs for check cashers, and offer another
alternative for consumers to access their finances.
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