Direct help for the unbanked
ust like computers, merchants must upgrade their products and services to keep pace with the changing times; they must retain their customer base or risk falling behind the curve. And, as every merchant knows, at the bottom of that long and lonely curve is a going out of business sign.
CashPass offers pay day lenders, pawnshops and check cashing businesses nationwide a direct deposit service – among other services – to keep businesses on the cutting edge of alternative payments, which means greater customer stickiness and increased foot traffic.
Direct deposit is a payment vehicle enabling payroll checks and other remittances to be loaded onto prepaid cards. Those cards can then be used to pay bills or buy goods, in-store, online or over the phone, just as with a debit card. CashPass cards are MasterCard Worldwide-branded and, therefore, can be used wherever the MasterCard brand is accepted.
National reach
The CashPass network comprises about 325 retail locations. Its partnership with Western Union Holdings Inc. expands CashPass' reach to include major locations where its targeted consumers – the unbanked or underbanked population – reside.
Scott J. Bennett, Vice President of Business Development at CashPass, pegs the underbanked at 35 percent of the population. "It's that high," he said, a number that has been "documented in several different studies." And with the economy in a downturn in which homeowners face foreclosures and mounting debt, Bennett expects that number to rise.
The unbanked or underbanked are defined as individuals who don't enjoy the benefits of a traditional bank account. There are numerous reasons why people do not have bank accounts to begin with or end up without them. They could be immigrants new to the country or citizens who that through bad luck, such as divorce or job layoff, find themselves in debt and unable to sustain a bank account.
Value proposition
Up until the advance of prepaid cards and other stored value products, individuals had to cash their checks, for instance, at check cashing businesses that could charge anywhere from 2 percent to 10 percent of the check's cash value. But, according to Bennett, using CashPass direct deposit can slice that check cashing fee nearly in half.
In replacing check cashing with direct deposit, however, check cashers will actually lose money per customer. But Bennett offers a salient point. "If I'm losing customers to direct deposit, I'd rather lose them to myself."
CashPass's direct deposit has other benefits for the customer as well. The funds are immediately loaded onto the card, eliminating the time of going to pick up the check and cash it or convert it to a money order.
"A lot of people who are challenged in the banking world have a challenge of getting around," Bennett said, "whether that be in the inner city or just people who don't have vehicles or means of transportation. With direct deposit, they can now function a little better in society because they don't have to travel to all these places to get their banking done."
Bennett should know. A 13-year veteran of the prepaid industry and current owner of five check cashing stores himself, Bennett understands that direct deposit is "a financial tool that a lot of our customers are looking for."
The learning curve
CashPass customers can manage their accounts online, reviewing transactions and deposits, as well as review their spending history.
Education is a vital component of reaching unbanked consumers. CashPass offers an instructional DVD that allows cardholders to go to www.cashpass.com where step-by-step instructions guide them through each function of direct deposit and explain how the product can benefit them. Bennett sees wide-open growth for CashPass in the next two years. The pay day and pawnshop sectors in particular are ripe for implementation of direct deposit because of their substantial unbanked clientele and the diversity of uses of the prepaid card for them, he said.
The CashPass card is "another payment vehicle," Bennett said. "It's also an Internet card, a direct deposit card; you can call it whatever you want. There are so many different capabilities that however you position it in your business plan, that's how it's going to be a success."
For ISOs
CashPass is selective about which third party vendors it uses to market its product. The ISOs – Bennett calls them marketers – that CashPass works with have to be knowledgeable about the industry. "They drive us the business," Bennett said "We handle everything else [with the merchant]. We handle implementation, training, marketing. So really the marketer … only gets us that relationship.
"If someone made a $1,000 commission check, that marketer would get x percent of that [sale]. And that would be a residual payment for the life of that contract."
In business since 2002, Burnsville, Minn.'s CashPass uses Galileo Processing Inc. of Salt Lake City, Utah, as its processor. Sioux Falls, Iowa-headquartered MetaBank is its card issuer.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.