Although cards are biting into cash and cheque usage in the US, certain consumer segments are still heavily dependant on paper-based payment methods. A new alliance between a cash-chequeing company and a real-time decision technology provider is hoping to change that, as Charles Davis reports.
The largest cash-chequeing firm in the United States has teamed up with a real-time decision technology firm in an effort to transition its cash and cheque customers toward card-based products.
Advance America Cash Advance Centers – with 2,750 cheque cashing and cash advance centres in 32 states from coast to coast – has joined forces with Valid Systems, a Fort Worth, Texas-based technology firm to launch a new ‘Check-To-Card’ programme aimed at making cardholders out of cheque-cashing customers.
The programme, an alternative to cheque cashing, enables participants to load payroll or government-issued cheques onto a full-featured NetSpend prepaid debit card.
Advance America designed the Check-To-Card programme to deliver speed, convenience and safety for consumers wanting a better alternative than traditional cheque cashing services. The prepaid card, issued by MetaBank and serviced by NetSpend, is accepted anywhere Visa debit cards are accepted.
Cardholder benefits include access to more than one million ATMs as well as a free cashback feature at thousands of financial institutions. Additional benefits of the prepaid card include zero liability protection, online bill payment and account access, no overdraft charges and access to the NetSpend ‘National Savings Program’ that currently offers a promotional 5 percent annual percentage yield.
Key to the programme is Valid’s TLR100 cheque verification solution, which the company has also adapted to ATMs. John Templer, CEO of Valid Systems, said the company is also working on several interesting initiatives aimed at bringing card products to the underbanked.
Real-time risk analysis
Valid Systems is a cheque processor that receives transactions from clients and conducts sophisticated risk analysis in seconds, so the merchant can make an informed decision as to whether to accept the cheque. Templer said that the Advance America system, in which customers can load all or part of their cheque onto a card product, is “a step in the right direction.”
“It’s getting us closer to a real cards-based solution, as there are a third [of consumers] who will take it, and we are finding that they are continuing to use it,” he said. “The challenge now lies in getting to the other two-thirds who are not currently using a card, and in addressing all the other industry issues with regard to pricing and reloading.”
Templer said that payroll and other forms of debit card products aimed at cash and cheque replacement are at a state analogous to cellular phones in the United States about a decade ago.
“Ten years ago, if you had a cell phone, everywhere you went you were being charged for going into roaming zones, and if you called one time of day it was one fee or another and the charges just overwhelmed the consumer,” he said. “Then the industry got serious and made it easy for the consumer and usage just took off. Cards for the underbanked are going to work the same way.”
Key role for ATMs
ATMs can play a key role, he said. An ATM’s ability to scan a cheque, verify a person’s identity and instantly dispense the cheque’s amount may seem a bit complicated, but Valid Systems has a solution it has developed for either the financial institution or retail environment.
“ATMs can be used in locations to load funds directly to a card, and then to make a surcharge-free withdrawal, or the second option is to have a cheque authorised and then have the retail customer walk to the ATM and choose cheque cashing and cash their cheque at the ATM,” Templer said.
The Valid solution, which comprises a cheque scanner, a driver’s license scanner and a fingerprint scanner, can be installed in 15 minutes at an ATM, because the system integrates with the ATM’s transaction network, assuming the network is PC or terminal-driven.
In a bank or credit union environment, the enrolment of a user in the programme takes place at the teller window, and subsequent cheque cashing taking place at the ATM. The cheque is inserted into the machine without envelopes or deposit slips and the ATM dispenses the correct amount of cash.
Both financial institutions and retailers are excited about the cheque cashing option, Templer said. For banks, it is an opportunity to get new clients by reaching out to the unbanked and underbanked markets. For retailers, it is an opportunity to increase their revenue, both from transaction fees and increased purchases from customers who now have cash in their wallets.
Valid Systems has reseller agreements for its cheque-cashing solution with ATM manufacturer Diebold and hybrid ATM kiosk deployer Tranax Technologies. Diebold is targeting financial institutions; Tranax is targeting independent sales organisations and retailers.
Improved verification procedures
Templer says verification of the cheque itself and of the individual attempting to cash the cheque has always been a stumbling block for self-service cheque cashing. But Valid is working to make its verification as detailed as possible, using biometric devices such as fingerprints to verify the identity with a solution that has roughly 45,000 bits of cheque verification criteria. The criteria can be examined in less than a second, he said.
“I think this is a very large market opportunity for folks who issue cards or resell cards, and it’s just going to get bigger because all of the major players are getting involved,” Templer said. “When the first payroll cards came on the market, I thought that would be the end of cheques for payroll, and here we are twenty years later, and that’s because there has been little effort to get to the traditional cheque cashers. Now I see that effort, across the industry.”
Templer said the obstacles to issuing cards in the underbanked sector have far less to do with the consumers than with the industry itself.
“These customers aren’t opposed to banking,” he said. “It’s the fee structure, and the processors are going to have to work closely with the card companies to streamline the process.”