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Check Cashing

U.S. Check Cashing, Money Transfer, Payday Loan Services and Pawnshops: A Market Analysis

June 2008

Table of Contents

                                                                                                                            Page

Introduction: Study Scope, Sources, Methodology                                   1-6

Executive Overview of Major Findings   ($350)                                               7-23

  • Definition of the components of the U.S. market serving consumers outside of the traditional financial services market (the “unbanked”).  Alternative financial    services:  Check Cashing Stores, Money Transfer Services, Pawnshops, Payday      Advance lenders.  Definition of each segment, number of outlets, and reasons for growth,  dollar mkt. size 1999-2007, 2008 & 2013 forecasts, major competitors.
  • Major market trends affecting each of four sectors.
  • Discussion of reasons for growth of non-bank services, population living below poverty level.
  • Discussion of family debt levels.
  • Discussion of non-commercial bankruptcy trends.
  • Discussion of annual U.S. immigration

Tables:

- U.S. Population Living Below the Poverty Level (1990-2004)
- Reasons Why Unbanked Families Do Not Have Checking Accounts (1995-2004)
- Debt Service Payments to Family Income (1995-2004)
- U.S. Noncommercial Bankruptcies (1991-2006)
- Annual U.S. Immigration (1992-2007)
- Market potential: 1999-2013 F estimated $ receipts of check cashing outlets, money    transfers, pawnshops, payday loan services, total industry.

The U.S. Check Cashing Industry   ($395)                                            24-57

 

Summary & Nature of the Business: How Check Cashing Companies Operate

Industry definition and size.  Number of outlets.  Check cashers offer convenience for a price. Typical fees charged. Other services offered: money orders, wire transfers, electronic bill payments, notary signatures, utility bill payments, and lottery tickets

Industry History and Evolution

  • Beginnings in the Great Depression. 
  • Impact of deregulation of the U.S. banking industry.

Customer Demographics (by gender, income, race, etc.)

  • Scarborough Research 2006 study. 
  • Ace Cash Express customer profile. 
  • FISCA 2006 trade group customer profile

Emerging Industry Trends

  • Check cashing fees on the rise, Consumer Federation of America survey
  • 2007 Federal Reserve Payments study, data for 2000, 2003, 2006
  • The entry of Wal-Mart into the check cashing market - discussion
  • More competition from: Pay By Touch, 7-Eleven, Wal-Mart

Industry Regulation

  • Federal Regulations, state regulations
  • Definition of: The Bank Secrecy Act, Money Laundering Suppression Act, USA Patriot Act, Gramm-Leach-Bliley Act

Table: Check Cashing Fees, by type check
Table: List of state check cashing fee caps
Table: State Banking Departments for States With Check Cashing Fee Maximums

Industry Size, Growth, Forecasts

  • Industry sales: 1999 through 2007
  • Composition of check cashing revenues by type
  • Industry sales and number of projected units for 2008 through 2013

Check Cashing Industry Structure & Profit Margins

  • Review of the composite financial statements for check cashing outlets in New York State.

Table: Number and Dollar Value of Payments by Check in the U.S. (2007)
Table: The major check cashing franchises at a glance, number, fees, capital needed
Table: Check volume & fees reported: 1993-2006, New York banking dept.
Table: Composite balance sheet of NYS check cashing outlets (2003-2006)
Table: Composite income statement of NYS check cashing outlets (2003-2006)

Major Competitors

Table: The Major Check Cashing chains (no. of outlets)

In-depth Profiles for… (Headquarters location, services, detailed 2005-2007 financials, mergers, history and company profile)

  • Ace Cash Express, Inc.
  • Check Into Cash
  • Dollar Financial Corporation

The U.S. Money Transfer Services Industry  ($350)                          58-78                    

Nature of the Business

The transition from the money order to the electronic wire transfers.
How electronic transfers work.
Industry size.

  • Industry is being driven by the rise in global immigration.

Table: U.S. Immigration by Country of Origin (1999-2003)

Industry Trends

  • International money transfer market is very fragmented.
  • Major players have a small market share.
  • Increased price competition is lowering transmission costs to the consumer.
  • U.S. banks are developing services for the U.S. - Latin America transmission corridor.

Table: Global Wire Money Transfer Market Share, by type network
Table: The Cost to Send $200 to Latin America as a % of Amount (2000, 2004)
Table: U.S. Bank Money Transfer Products

Regulation of the Industry

  • Review of state regulations.
  • Review of federal regulations.

Industry Size, Growth, Forecasts

  • Industry revenues for 1999 through 2004 - discussion & analysis
  • Industry revenue projections for 2005 through 2008

Table: Number of Western Union and Moneygram Agents Worldwide (1999-2004)

Major Competitors

In-Depth Profiles for… (Headquarters location services, detailed 2002-2004 financials).

  • Moneygram International
  • First Data Corporation
  • Vigo Remittance Corporatio

The U.S. Pawnshop Industry      ($395)                                                 79-103

Nature of the Business

  • Earliest form of consumer lending.
  • Highly fragmented industry that is concentrated in the southeast and southwestern portions of the U.S.
  • The pawn loan process - discussion.

Emerging Industry Trends

  • Pawnshops are entering the payday loan market.

Pawnshop Customer Demographics (by age, race, gender, income, etc.)       

  • Review of the Georgetown study - major findings

Regulation of the Industry

  • Review of state regulations.
  • Review of federal regulations.

Table: State Regulations on Pawnshop Interest Rates and Fees
Table: State Pawnbroker Associations - contact and phone.

Industry Size, Growth, Forecasts

  • Industry sales and number of units for 1999 through 2004 - discussion
  • Industry sales and number of projected units for 2005 through 2008 - analysis

Table: International Gold Prices (1999-2004)

Major Competitors

In-Depth Profiles for… (Headquarters location, services, detailed 2002-2004 financials).

  • Cash America International, Inc.
  • Cash America International, Inc
  • EZCORP, Inc.
  • First Cash Financial Services

The Payday Loan Industry   ($395)                                                 104-132

Nature of The Business

  • Fastest growing segment of the alternative financial services industry
  • The standard and bank business models - discussion
  • CFSA industry Best Practices. Guidelines.

Table: Comparison of Standard Payday and Bank Payday Loan Models

Emerging Industry Trends

  • Check cashing services and pawnshops are entering the payday loan market - analysis

End-User Demographics - Who is the Payday Advance Customer?
(by age, income, amount of loan, gender, reasons for loan, etc.)

  • Review of the Georgetown Study - major findings
  • Review of the IO Data study - major findings
  • Advance America’s customer demographics.

Regulation of the Industry

  • Review of federal regulation
  • Review of payday loan terms and interest rates

Table: Comparison of Payday Loan Terms and Interest Rates by State

Industry Size, Growth, Forecasts

  • Industry sales and number of units for 1999 through 2004 - analysis
  • Industry sales and number of projected units for 2005 through 2008

Table: Payday Loan Outlets by State - number.

Payday Loan Industry Financials & Profit Margins

  • Review of the Flannery and Samolyk study - major findings.
  • Discussion of composite industry financials.

Table: Payday Loan Outlet Composite Income Statement for a Typical Unit.
Table: Payday Lender Loan Portfolio Characteristics
Table: Customer Loan Activity (no. of customers, loans, other metrics)

Major Competitors

In-Depth Profiles for… (Headquarters location, services, detailed 2002-2004 financials).

  • Advance America Cash Advance Centers, Inc.
  • World Acceptance Corporation
  • QC Holdings, Inc.

Reference Directory of Trade Associations & Sources                 133-143

  • Address, phone, contacts for major trade groups, consultants, list of industry studies and articles, Wall Street analysts/research reports.