Study Outlines Reasons For CUs To Offer Check-Cashing

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A new study issued by the Filene Research Institute suggests more credit unions should get into the check cashing business.

The study, "The Implementation of Check-Cashing Services: A Growth Opportunity for Credit Unions," concluded that millions of Americans who use check-cashers would use credit unions if fees were comparable and they were aware of the service. Release of the study comes as a growing number of states are allowing credit unions to perform services like check cashing for non-members within their fields of membership.

Saying they were seeking 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," the study states.

The check-cashing pilot project worked closely with leagues and associations to identify credit unions with significant interest in offering check-cashing services. A total of 22 credit unions or credit union related organizations and initially five leagues participated in the project, which was designed to test the feasibility of offering transaction services to non-members. Transaction services offered often included check cashing, money orders, and international money transfers.

According to Filene, the pilot project tested a number of "compelling reasons for offering fee-based check-cashing and services," including:

* To fulfill the traditional role of credit unions in offering low-cost financial services to individuals and households of modest means.

* To balance the cost of services among those who support the credit union and those who use it as "free riders."

* To improve the credit union's bottom line through transactional services.

* To attract new members, as non-members learn about the traditional services available from a credit union.

"This research and pilot project...has implications for the delivery of financial services to a segment of the American population that needs those services most," said Bob Hoel, Executive Director, Filene Research Institute. "Even more important, it reaches into the halls of Congress and state legislatures to demonstrate credit union commitment to serving the financial needs of all citizens. And it provides new revenue streams for credit unions."

The Filene special report features case studies of seven organizations that participated in the pilot check-cashing program, including their specific reason for taking part, marketing strategy, and operational experience.

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