Why Check-Cashers Are Still King
I couldn’t tell you how much money my parents spent using check-cashers when I was growing up, but I know it was a lot more than they would have paid to access their own money at a traditional financial institution. For background, my family immigrated from Mexico when I was almost five years old and we did not have an account at a traditional financial institution until I was a teenager. So why did my parents prefer to use check-cashers instead of opening a checking and savings account at a credit union or bank? I recently asked my mom this question and she pointed to a number of reasons, which are consistent with what newly immigrated unbanked and underbanked populations in the U.S. will tell you. These reasons include:
My parents did not think that traditional financial institutions wanted their business because they did not make high incomes
The check-cashers were everywhere where we lived and offered friendly service in their native language - Spanish
The check-cashers were one stop shops offering money orders, utility bill pay, international remittance services and more, which they often took advantage of
The process at the check-cashers was easy, straightforward, not a lot of paperwork or questions were asked and they provided immediate service
The fees charged by the check-cashers did not seem high in comparison to the value of the services they received when they needed them
While the value the check-cashers provided my parents seemed great to them at the time, a missed opportunity was that my parents never got credit for these financial transactions on their credit reports. This would have come in handy when they needed future credit cards, auto loans and mortgages. In fact, they did not build any traditional credit while they were unbanked. The missed opportunity for traditional financial institutions was that they missed out on a loyal, long-term financial relationship with my parents that may have started with small dollar financial transactions, but that eventually would grow into larger consumer loans, auto loans, mortgages and credit cards, not to mention the additional financial relationships that would have followed with their four children.
In 2022, the global check-cashing market accounted for $40.7B and it’s projected to grow to $56.4B by 2032 according to Market Research Reports. The real competition is not between traditional financial service providers, its with alternative financial service providers like check-cashers who meet a need for unbanked and underbanked consumers. It is not too late, your credit union and bank can choose to invest in unbanked and underbanked communities early on in their financial journeys and reap the rewards that come from building a loyal long-term financial relationship. I wish a credit union or bank would have reached out to my parents early on in their financial journey, it would have made their credit-building journey and asset-building journey a lot easier later on.
