Every two weeks, nurse's aide Lacretia Banks needs to find someone to cash her paycheck. After bouncing too many checks five years ago, she hasn't been able to get a bank account. But come payday, you won't find her in a place like Cash Advance America or Buckeye Check Cashing. She's a regular at the KeyBank branch in Cleveland's Buckeye neighborhood.
Lacretia Banks: You're in and you're out. When you come to a bank, you're in and you're out. And at other check cashing places, the fees are too high.
Lacretia Banks paid about $4, or 1.5%, to cash her $250 check - or about half what she'd pay at a check cashing store. The Center for Financial Services Innovation estimates Americans spend at least $11 billion every year at places like check cashers and money-wire servicers. That's an attractive chunk of change drawing the attention of more in mainstream financial services. Michael Griffin is a senior vice president at KeyBank.
Michael Griffin: We're seeing check cashing places pop up on every corner, and thought, 'We're a bank. We can do that better than they can do that. So why wouldn't we get into this business and really approach the lower, moderate income, the unbanked, as a market segment. Why don't we offer the services they need, be able to serve those well, make money at it, and improve the community at the same time.
Since KeyBank started check cashing services in Cleveland in late 2003, they've served 10,000 customers across the country. It's now rolling out check cashing services at more branches in lower and middle income neighborhoods in other states. Companies like U.S. Bank and FleetBoston are also reporting successes and expansion plans. Wal-Mart is dramatically increasing its low-cost check cashing, wire transfer and utility payment services, moving them into more formal MoneyCenters. Wal-Mart's John Metz says the retail giant has been providing these services at its customer desks for years, and demand is strong enough to fuel the creation of 1,000 MoneyCenters by the end of 2008.
John Metz: When we separate these businesses, we see a huge uptick in the money services.
Northeast Ohio's first Wal-Mart MoneyCenter is set to open at Steelyard Commons in October. Jean Fox at the Consumer Federation of America has been watching the growing interest in low-cost financial services. She says competition in the check cashing industry will help consumers, but wants companies to help new customers get bank accounts with reasonable fees.
Jean Fox: Just cashing checks for consumers at a lower price than you would pay at a store front check casher, I mean, that's an improvement, but we want to graduate folks to having real depository accounts as long as they are safe to use.
Cleveland's Key Bank says that's what makes its check cashing service different from Wal-Mart's. Community Development Banking vice president Emmanuel Glover says what makes Key's check cashing program competitive is a financial education program that helps people improve their credit and move into other financial products.
Emmanuel Glover: Wal-Mart can't help a person remove themselves from a debt situation. Wal-Mart can't help you purchase a home or buy a car, if that's your goal. So if you look at some of the clients coming in, there's truly a goal that's been identified as well. It's really sold as a package and not just check cashing.
KeyBank is looking to check cashers for inspiration on how to expand its program, and is looking into offering utility bill payment and possibly cheaper short term payday loans. I'm Mhari Saito, 90.3.