What We Can Learn from Check Cashers

“The service was great – delivering was faster than lightning could strike. I’ve never been presented with such an outstanding service….”

That’s a pretty powerful testimonial – one that didn’t come from a community bank or a credit union, but one of 1,337 five-star reviews (81%) for Speedy Cash, one of the fastest growing and largest providers of short-term loans in the United States.

According to Lisa Servon, author of “The Unbanking of America,” there are more payday loan storefronts in the US than Starbucks and McDonald’s combined. The number of check cashing transactions have risen from $45 billion in 1990 to $58 billion in 2010. From 2000 to 2010, payday lending transactions have risen 200% from $10 billion to $30 billion.

For those of us who scratch our heads and thumb our noses at these alternative lenders, I was impressed with Lisa’s research, which she shared at this year’s New Jersey Credit Union League Convention. A professor at the University of Pennsylvania, she worked as a teller for check-cashing centers and payday lending stores to get an inside glimpse.

She told of a story of a small contractor who cashed a $5,000 check where he paid a couple of hundred dollars and even gave her a $10 tip to cash it. If he has a business, including a truck and workers, why not put that money into a bank account?

There are two theories here. One, it was Thursday, the day before payday on his jobsite, and he needed cash to pay his workers who don’t have bank accounts. The other theory was he got a job that he needed to start the next day and he couldn’t start unless he had supplies. If he puts it in the bank, he would have to wait until Tuesday for the check to clear.

According to Lisa, the fastest growing segment for payday lenders are college educated homeowners who make $50,000 or more per year, adding “more than half of American’s cannot come up with $500 in the case of an emergency.” A recent study in the UK shows that one in 20 nurses have been forced to take out a payday loan.*

Meanwhile, Lisa spoke of another customer who paid $2 to cash a $10 check. When you are living on the edge, you’re willing to pay. After all, it’s not like this customer could have withdrawn $10 at an ATM where the minimum is often $20. However, overdrafts on checking accounts are “short term loans,” she added, and are often more expensive than the alternatives.

Two big takeaway from Lisa’s presentation is how most check cashing places look like a fast food restaurant. There’s a menu of services that we as credit unions or banks may think of as superfluous, but customers view as greater transparency. Meanwhile, they deliver awesome customer service. It’s not just a friendly smile, but an active pursuit in getting to know how to help the consumer.

We as credit unions and community banks believe we offer an alternative to the big banks. If you seek to serve the underserved or the unbanked, perhaps we should stop looking like the big banks and take a page out of a different blueprint.

*source: Chronicle Live – North East News: More than one in 20 nurses have taken out a payday loan to pay bills, survey claims


Frank Allgood has more than 17 years of experience in every facet of public information and marketing communications. As Relationships & Results Leader for Your Marketing Co., he is responsible for strategic brand experiences and marketing initiatives for credit unions and community banks across the country. For branding or rebranding projects, call 864.326.8740 or email frank@yourmarketingco.com.