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
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
“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
“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
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
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
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.
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