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Check Cashing Business for Sale | Industry Deep Dive

Written by: Marketdata LLC
Last Updated: November 12, 2021
Check Cashing Industry

Check Cashing brief

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


Consumers realize that these services charge high interest rates but they don’t mind.

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.

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.

Check Cashing Industry Definition

These are industries in and of themselves, and they fall into the U.S. Census Bureau’s NAICS code 522298.

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.

Writting a check

Check cashers typically offer a fairly wide range of services to their customers.

  • paying utility bills
  • direct deposit accounts
  • pawn shop services
  • gold buying and selling
  • tax preparation services
  • selling mass transit fare cards or tokens,
  • selling pre-paid telephone cards,
  • offering currency exchange services
  • selling postage, lottery tickets
  • photocopying and fax services.

While check checking fees have been rising, the use of checks as a payment instrument has been on the decline. 

Walmart is now the largest check casher in the country.

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. 

The Major Check Cashing & Money Transfer Companies

  • Western Union
  • MoneyGram Intl.
  • Euronet
  • ACE Cash Express (Populus Financial)
  • Check Into Cash
  • Money Mart Financial (Dollar Financial)
  • AMSCOT Financial

Check Cashing Industry Major Trends & Issues

  • The industry is mature and fragmented, with many small competitors and several large competitors.
  • The largest competitors have grown by the acquisition of smaller players, franchising, new technologies, and expansion into overseas markets such as Latin America.
  • Also the shift to more online services and apps has been accelerated by the Covid-19 pandemic. Online services account for an increasing share of the business in all five sectors.
  • Many alternative financial services fare better in bad economic environments such as recessions.
  • There is substantial cross-over between the five sectors. Check cashing companies may also be engaged in money transfer and pawn operations. Pawn shops may offer check cashing and payday loans.
  • The U.S. government has staged on-again/off-again crackdowns against the high costs of alternative financial services, depending on who is President. Republicans tend to be less restrictive than Democrats.
  • The number of retail storefronts (check cashing outlets, pawn shops, payday loan stores, rent-to-own stores) has been declining during the past 5-7 years, as more operations move online and consolidation takes place.
  • There are an estimated 9 million “unbanked” households in the United States.
  • Covid-19 has affected all five segments of this industry, some more than others.
  • There are several pockets of growth: online installment loans and apps that are replacing traditional payday loans, and money transfer services helped by increased worldwide migrant movements. During just the past five years, online installment loans have gone from being a niche offering to a hot growth industry.

Check Cashing Industry

Check Cashing Market Size

Industry Size – Market Potentials of the Major Industry Segments
($ millions, industry receipts)

YearCheck Cashing OutletsMoney Transfer ServicesPawn shopsPayday Loan ServicesRent to Own StoresTotal
2005$1,805$4,983$10,487NA$6,700 
20061,8965,64811,121NA6,800 
20071,9956,31111,990NA6,300 
20081,9356,86812,349NA6,600 
20091,8196,67312,657$6,6007,000$34,749
20101,8136,78513,4547,2007,60036,852
20111,8137,19514,5308,400NANA
20121,8167,48615,5769,2008,50042,578
20131,8557,24116,7289,1008,88043,804
2014NA7,749NA8,8009,800NA
2015NA7,866NA6,6009,940NA
2016NA8,008NA6,10010,280NA
20171,8008,170NA5,30010,140NA
20181,7008,22713,2894,30010,82038,336
20191,7007,82413,0904,00011,03037,644
2020 F1,3266,86912,7493,40011,69036,034
2025 F1,5327,79613,9604,75013,73541,503

Source: Industry trade associations, Marketdata LLC estimates and forecasts

2018-2019 Check Cashing Industry Performance

The CFSI has been renamed and is now known as the Financial Health Network. The latest study is from 2019 (Financially Underserved Market Size Study), 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.

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.

 No financial information is available from Check Into Cash or Money Mart, since they are private companies.

money

2020 Forecast & Effects of Covid-19 Pandemic

 Several things are apparent in the check cashing business:

  • The number of commercial checks processed has been declining by 4.9% per year from 2015-2019.
  • The number of government checks processed has been declining by 2.8% per year from 2015-2019.
  • There has been more competition from traditional banks and via check cashing kiosks.
  • The pandemic resulted in significantly less in-person traffic and transaction volume at cashing retail stores nationwide, resulting in lower revenues for six months. However, check cashers have been open, considered to be “essential services”.
  • Check cashers cannot expect to offset declines in check cashing fees from payday loan products, as the latter are under fire by regulators. Eight years ago in 2012, payday loans accounted for 16% of the revenues of check casher, but that has all but disappeared today.
  • The money transfer business was expected to decline by 12% last year—another market that check cashers frequently participate in. No growth there either.
  • According to the lasts Federal Reserve report, from 2015 to 2018, check payments declined 7.2 percent per year by number and 4.0 percent per year by value.
 

Ed Dilessio at FISCA

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.

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.

Consequently, all other things being equal, there is not much evidence of any significant growth areas of the business in 2020.

Marketdata analysts forecast that the U.S. check cashing industry revenues declined by 22% last year, to a value of $1.32 billion.

Check Cashing Industry

2021-2025 Check Cashing Industry Forecast

As society’s attitude toward “alternative financial services” such as check cashers and pawn shops changes, these outlets will not be looked at in a negative light. Pawn shops have renovated their stores and now serve more middle class and upscale customers than in the past, and popular TV show such as Pawn Stars have helped boost their reputation.

Rather, check cashing outlets will continue to be important to the still large “unbanked” population that is tired of the restrictions placed upon them by traditional banks. The convenience on 7-day access and extended hours will remain a big competitive advantage.

Distrust of large financial institutions by lower income and minority households looms large. The appeal of the marketing theme: “You’re OK with us.”, used by Florida-based AMSCOT, rings true.

International expansion and growth via acquisition will be used by the larger competitors such as DFC Global and Ace Cash Express, but the bulk of the outlets will still be small local operations and those affiliated with retailers such as grocery stores and Wal-marts.

Marketdata analysts think that in 2021 we will see widespread distribution of a vaccine for Covid-19 and the economy will return to a more normal mode. We think that there will be somewhat of a rebound to make up ground lost this year, for check cashing outlets, as people return to retail storefronts to use their services. We think that revenues will make up about half of the revenues lost this year, growing by 12% next year, to $1.48 billion.

Beyond 2021

We forecast that revenues will grow very slightly, at a 0.8% average annual pace, since there are no new services on the horizon that could boost revenues for check cashers. Under an assumed Biden administration, regulations could become stricter than currently under the Trump administration.

Consequently, Marketdata analysts think that industry revenues will grow at a 0.8% annual rate, reaching a value of $1.53 billion in 2025.

Money

Money Transfer Services

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.

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. 

Money Transmission Services are regulated on both the state and federal level.

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. 

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.

The major drivers for the Money Transfer Industry are global migration and the growth of immigrant remittances back to their home countries.

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.

check

The second driver for the growth in the money transfer industry has been the growth in global remittances.

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. 

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.

Money Transmission Services are regulated on both the state and federal level.

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.

Number of Western Union and MoneyGram Agents Worldwide

 200220042005200720122019
Western Union151,000220,000271,000324,000510,000500,000+
MoneyGram57,00077,00089,000143,000310,000310,000

Source: Company Reports

Money Transfer Industry Size, Growth, Forecasts

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..

 We project  2.7% average annual gains over the next several years, to $7.8 billion by 2025. 

Note:

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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