Is your check-cashing business struggling to get a fair deal on a merchant account – or even to be accepted? NMA can help. Read on for our expert view on the challenges you face and then get in touch for more information about how we reduce your risks and costs.
The check-cashing industry is facing increased competition from banks and a shrinking target market. In 2011, the percentage of unbanked Americans stood at 8.2%, but this market has shrunk considerably since then. According to Federal Reserve statistics, 22% of adults are unbanked (5.4% – down almost 50% from 2011) or underbanked (16.6%).
The industry is also experiencing increased competition from banks and other alternative finance businesses who have now realized that this segment of the population offers a significant opportunity. They are increasingly creating new services that directly compete with those check-cashing businesses provide.
However, with 63 million American adults still looking to the check cashing industry for services such as check cashing, short-term loans, currency exchange, and other operations that others typically use a bank for, there are opportunities. Many customers distrust banks, and so this market is unlikely ever to disappear entirely.
Why Are Check Cashing Companies Considered High-Risk By Banks and Credit Card Processors?
Financial institutions consider check-cashing companies to be high risk because there is a significant risk of fraud. For example, criminals steal checks for tax refunds and social security benefits and then cash them for profit. There is also a risk of counterfeit and forged checks.
These forms of fraud are difficult to counter and create both financial and reputational risk to banks and credit card processors. This leaves businesses who offer check cashing services struggling to get approved for a merchant account at a fair rate.
How To Reduce Your Risk
Check cashing businesses should reduce their risk by:
- Staying up-to-date with the latest MSB (money service business) regulations for anti-money laundering (AML).
- Training employees to spot potential fraud.
- Paying extra attention to first-time customers, especially when the check number shows the account is relatively new. Statistically, this indicates an increased likelihood of fraud.
- Consider offering loyalty programs to repeat customers and other services such as prepaid cards and bill pay services.
Additionally, you should consider working with a payment processor like NMA who really understands your industry and who can help you put strategies into place to reduce your risk further.
How NMA Can Help You Manage Your Risk
Unlike a typical bank, we can help seemingly high-risk companies to manage their risk effectively through a combination of careful underwriting, relationship building, and ongoing monitoring. By taking care of the small details, we turn ‘high risk’ accounts into ‘managed risk.’
Together, our payment processing solutions and global network of strategic partnerships enable your check-cashing company to save money, reduce risk, and help you get funds deposited safer and quicker than with other competing solutions.