Jan 01 2004

The Implementation of Check-Cashing Services: A Growth Opportunity for Credit Unions

In research sponsored by the Filene Research Institute, Professor John P. Caskey, of Swarthmore College, suggests specific ways in which credit unions can provide services currently being offered by the alternative financial sector (AFS) – check-cashing outlets, payday lenders, small loan companies, pawnshops, rent-to-own shops, and car title lenders.

Millions of low- and moderate-income Americans do not obtain payment services from mainstream financial institutions. These individuals are more likely to rent their homes, to be racial or ethnic minorities, young, limited to no assets and to possess limited educational attainment. In most cases, they have almost no month-to-month financial savings, and frequently have impaired credit histories.

Credit unions are in an excellent position to reach out to these people, and fulfill their traditional mission of providing financial services to people of modest means. In research sponsored by the Filene Research Institute, Professor John P. Caskey, of Swarthmore College, suggests specific ways in which credit unions can provide services currently being offered by the alternative financial sector (AFS) – check-cashing outlets, payday lenders, small loan companies, pawnshops, rent-to-own shops, and car title lenders.

To provide empirical evidence of the benefits and challenges of transaction services, the Center for Credit Union Innovation and the Filene Research Institute undertook a pilot project to determine whether these services are a practical complement to credit union product offerings. The pilot also demonstrated that an idea can be taken from a research study and implemented in the credit union marketplace.