Check Cashing businesses, such as Family Financial Centers, serve the “sub-prime” or “unbanked” consumer, which basically means lower-income households with limited access to credit, renters, minorities, migrant workers, and the divorced. Many of these consumers do not have a bank checking account and rely on small non-secured loans to meet weekly or monthly bills, or emergency situation such as unexpected car repairs or medical bills.
Services such as these are popular because they are more convenient than traditional banks, available to consumers seven days a week and for extended hours
In the U.S., at least 9 million households are “unbanked”. According to data released by the Fair Isaac Corporation on September 10, 2019, consumers in the “subprime” category (those with credit scores below 650) made up approximately 28% of the United States population.
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Many of these consumers cannot maintain sufficient balances to avoid high monthly fees, write too few checks to need a checking account or have too little income to justify a savings account. Additionally, the decline of bank branches in many lower income and inner city neighborhoods has made a banking relationship inconvenient for many consumers.
The industry is impacted by a number of trends. Check cashing fees have been on the rise. The use of checks as a payment instrument has been on the decline, and checks now account for 26% of all U.S. noncash payments. Check cashers face increased competition from traditional financial institutions, automated check cashing systems, and the entry of Wal-Mart into the check cashing industry.
The industry is regulated at both the state and federal levels. Thirty-one states and Washington, D.C. require check cashers to be licensed and registered.
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The regulation of check cashing services is at the state level, and it varies from state to state based upon the services that the company offers to its customers. Thirty-one states and the District of Columbia require check cashers to be licensed and registered, and they may have minimum bonding and capital requirements.
And estimates that the value of check cashing services fell from $1.8 billion in 2016 to $1.7 billion in 2017 and 2018. The industry’s revenues have declined at a 4.8 CAGR from 2015 to 2019.
Marketdata analysts estimate that the U.S. check cashing industry revenues were flat in 2019, worth $1.7 billion, based on the latest data from the Financial Health Network.
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Assuming that the figures from the Financial Health Network are accurate, if industry revenues were $1.7 billion and there were an estimated 11, 830 check cashing stores in operation, that would mean that the average revenues per store for the whole industry are only $144, 000 per year. This may be true of the smaller stores that are not part of the large chains such as Populus Financial, Check Into Cash and Money Mart. However, Marketdata estimates that the three large chains account for about 2, 700 stores – or just under 23% of the total.
In 2011, the average per store for outlets in Illinois was $321, 000 (based on a Illinois Dept. of Financial & Professional Regulation survey), and the estimated average for Populus in 2019 was about $712, 000.
Marketdata analysts spoke with Ed Dilessio at FISCA. He stated that there is no segment of the business that is growing currently, and that transaction volumes are down as much as 30% in New York and other states. New York had some especially strict measures implemented during the Spring to contain the pandemic, so the decline was probably deeper than other parts of the country. In addition, there was no small loan lending activity to offset the decline in check cashing. However, business has been down significantly elsewhere.
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Mr. Dilessio feels that we will see closures and contraction in the industry this year. He points out that the health of this business reflects what’s happening in the overall economy. When more people are employed there is more activity in check cashing, money transfer and all related activities. He could not estimate the average revenues of a typical check cashing outlet, or an estimate of the industry’s size n dollars.
Marketdata analysts made a profound analysis of the industry and produced a forecast for the following years on how the industry will recover (or not) from the COVID-19 pandemic crisis.
Are you interested in this industry? Do you want to discover more and learn what analysts specialists anticipate for the following years? Then we, at Vetted Biz, recommend you order the exclusive 32-page check cashing industry report (Report OV64) by Marketdata. You can purchase it by clicking here.
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The money transfer business was initially based upon the paper money order. The U.S. Postal Service began offering domestic money orders in 1864 and international money orders in 1869. Western Union introduced its consumer-to-consumer money transfer service in 1871. The MoneyGram affiliate Travelers Express began offering money orders in 1940. The money order business was very profitable because the service provider would profit on the float, the time between the when the money order was purchased and cashed.
The old money order has now been largely replaced by electronic funds transfer, where funds can be transferred instantaneously nearly anywhere in the world.
The major drivers for the Money Transfer Industry are global migration and the growth of immigrant remittances back to their home countries.
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Global migration is on the rise. The United Nations projects that the world’s immigrant population will reach 280 million by 2050. The World Bank estimates that global remittance inflows were $131.5 billion in 2000 and by 2007 it was estimated that these reached $317.7 billion.
In the United States, virtually all states, the District of Columbia and Puerto Rico require money transmission services to be licensed in order to conduct business within their jurisdiction. They are also subject to some form of regulation in each of the countries and territories in which they offer services.
The global money transfer market remains very fragmented, with Western Union, MoneyGram and EuroNet being the three largest U.S. players. Many U.S. and foreign banks have developed money transfer products to compete in this market. New technologies have created new competitors in the form of prepaid cards and mobile based remittances through cell phone handsets.
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Trends in the volume of cross-border money transfer activity correlate with migration, global economic opportunity and related employment levels worldwide. A significant trend currently impacting the money transfer industry is increasing regulation. Regulations in the United States and elsewhere focus, in part, on anti-money laundering, anti-terrorist financing, consumer protection, consumer privacy, data protection, and information security.
Global migration is on the rise as people seek better economic opportunities abroad. The United Nations reports that over the last 40 years the global stock of international immigrants has doubled. Between 2000 and 2012, global migration has increased at a 1.4% average annual rate, rising from 176.7 million to 214.2 million. The United Nations projects that the world’s immigrant population will reach 280 million by 2050.
It has long been a tradition among immigrants to send cash remittances to their families in their home countries. In the past, an individual returned home with a money belt full of cash. Many of today’s immigrants send their money home via wire transfer.
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Global remittances are projected to decline sharply by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country. Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
In the United States, virtually all states, the District of Columbia and Puerto Rico require money transmission services to be licensed in order to conduct business within their jurisdiction. Licensing requirements generally include minimum net worth, surety bonds, operational procedures, permissible investments, and the maintenance of minimum reserves to cover outstanding payment obligations. Most states require reports on a quarterly or more frequent basis to verify compliance.
Western Union and MoneyGram have the largest global networks. According to company reports, Western Union had 510, 000 agents worldwide and MoneyGram has 310, 000. No other network can come close to both of their global footprints.
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Marketdata estimates that the U.S. Money Transfer Industry had $2.51 billion in revenues in 1999, and by 2019 this had grown to an estimated $7.82 billion. Marketdata believes that industry revenues declined by 4.9% in 2019 and declined another 12.2% to $6.87 billion in 2020.
Do you want to discover more and learn what analysts specialists anticipate for the following years? Then we, at Vetted Biz, recommend you order the exclusive 32-page money transfer services industry report (Report OV64) by Marketdata. You can purchase it by clicking here.
The complete Marketdata Overview contains information about Pawn Shops, Rent-to-Own Stores and Payday Lending Services, as well as a Reference Directory of industry trade associations, reports and other sources.
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