Banks See to Enter the Profitable Business of Check-Cashing

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Source:   —  April 13, 2016, at 10:55 PM

Traditional banks have avoided offering the service, which is generally aimed at people with low incomes or without bank accounts, but presently they wish to obtain in on a business that's arrive to be dominated by local check-cashing stores.

Banks are rolling out services that authorize their customers to cash a check before it clears — for a fee, of course. Traditional banks have avoided offering the service, which is generally aimed at people with low incomes or without bank accounts, but presently they wish to obtain in on a business that's arrive to be dominated by local check-cashing stores.

U. S. banks and the consultants that serve them believe the services can be marketed more broadly than they currently are, and earn banks potentially millions in extra fee income. At minimum two large banks have offered or are in the process of offering such "instant funds availability" services.

Bank consultants are hopeful the "wish it now" attitude among customers could results in tens of millions in new fee income for the banks.

Consumer advocates have expressed reservations. While having instant access to funds from a check deposit can be helpful, it'd be yet another fee people would've to pay for everyday banking services, and would still most likely be used by low-income customers.

There are also concerns that banks may not disclose to customers who express interest in the service that the funds from their deposited checks will be available fairly soon anyhow if they just wait.

Below current Federal law, the first $200 of a customer'south deposit should be made available the following business day and another $200 available the day after that. In the $500 deposit example above, a customer would've access to nearly all their funds within forty-eight hours.

"We love to look banks reaching out to low- and moderate-income customers, but this is basically the banks getting into check-cashing," said Lauren Saunders with the National Consumer Law Coalition.

Cincinnati, Ohio-based Fifth Third Bank recently launched a new checking account called Express Banking which allows customers to obtain immediate access to deposits for a fee. The fee varies depending on how active the customer is with Fifth Third, but can be as low as one % of a check to as high as four percent.

For a $500 check, Fifth Third's one % fee would be $5, which is more than the $3 fee Wal-Mart charges for check-cashing services in their stores. However Wal-Mart doesn't proposal check-cashing services for personal checks.

When Fifth Third started offering check-cashing services in two thousand-eleventh, the bank started noticing it was getting repeat customers who didn't have bank accounts looking to cash checks, said Tag Erhardt, director of retail product management at Fifth Third. The bank decided to expand an account that'd invite those customers, he said.

"It builds a relationship that places these consumers back into the banking system on their terms," he said.

Fifth Third says the average check cashed is between $200 and $400. The bank does tell customers when funds from deposited checks would be available without any intervention at the same time they proposal the check-cashing service.

Fiserv, a financial technology and consulting company, has been selling a service called Immediate Funds to banks. The company says one top ten bank, which it declined to identify, is in the process of starting to proposal the service. At a conference in Las Vegas, a Fiserv representative said that two other large banks have made commitments to utilize Fiserv to proposal the service.

Customers could look banks offering check-cashing services routinely -- nearly love an impulse buy. A customer making a check deposit using their banking app could be offered the option, or look it every time they create a deposit at the ATM, on top of selling the option interior of branches.

"People wish what they want, when they wish it," said Kevin Gregoire, grouping president of the financial institutions grouping at Fiserv, in a response to written questions about the product.

Fifth Third offers the check cashing service via its mobile app, but not at ATMs, Erhardt said.

Certegy, the company Fifth Third Bank has hired to handle its check-cashing services, declined to comment. Certegy is owned by FIS, another financial service technology firm.

In a survey that Fiserv conducted, seven out of ten respondents said they'd utilize check cashing services by a bank at minimum once a month.

While check usage has been on the decline for years, there'south a lot of money to be made in check cashing. Banks processed 5.4 billion checks in two thousand-fifteenth, according to the Federal Reserve, with an average dollar quantity of each check of $1.487. And the cost to processing those checks have arrive down significantly at banks since the advent of remote check deposit services on smartphone apps and ATMs.

Financial Service Centers of America, the trade organization that represents check cashers as well as payday lenders, declare the industry operates 13.000 stores nationwide providing $106 billion in products to roughly thirty million customers.

States heavily regulate check-cashing, frequently capping the fees they can charge. For example NY allows a maximum of two % to be charged for cashing a check.

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