A Manhattan Beach, Calif., credit union says its acquisition of a Los Angeles check casher and payday lender should result in more competitive pricing for short-term loans in southern California.
Kinecta Federal Credit Union paid $45 million last week for Navicert Financial Inc., which does business as Nix Check Cashing, and hopes to convert its customers into members of the $3.9 billion-asset credit union.
Buying Navicert, which has since been renamed Kinecta Alternative Financial Services Inc., added 55 Los Angeles-area locations to the credit union's 23 branches.
John Caskey, an economics professor at Swarthmore University who studies consumer finance and the underbanked, said he has "never seen anything of this scale" in terms of a combination between a credit union and a check casher.
Thomas Nix, the president and chief executive of Navicert until the purchase, said in an interview Monday that the acquisition would lead to growth. He is now a vice president at the credit union and the president of the check-cashing subsidiary.
The Carson check casher recorded 5 million visits last year and is the nation's 10th-largest agent for NetSpend Holding Inc.'s general-purpose, reloadable, prepaid debit card — a product that is popular with the underbanked, students, and children.
Being owned by the credit union will let the unit lower its prices for cashing checks and offer larger loans with longer repayment periods, Mr. Nix said.
Kinecta Alternative will offer an unsecured loan that "looks and feels" like a payday product, he said, but the "critical point is we are exempt from payday advance laws" limiting such loans to $300 and the repayment period to 31 days.
Kinecta Federal is still deciding what terms to offer for unsecured loan products, Mr. Nix said. For the time being his unit will continue to charge 75 cents to cash checks plus 2.1% of the check's value — fees that Prof. Caskey says are comparable to what competitors charge.
Mr. Nix said his unit's check-cashing service make sense for customers living paycheck to paycheck, but they are too costly for those with larger paychecks.
Kinecta hopes to turn some of those customers into credit union members. "That is where the opportunity is," Mr. Nix said.
Prof. Caskey agreed that check-cashing services provide an ideal way for a credit union or bank to acquire customers, such as young people who "are not financially well established but will be" in a few years and who need more sophisticated products like a car loan or mortgage.
Converting check-cashing customers into credit union members is just the first step in Kinecta's expansion plan. Once it has attracted new members, it hopes to cross-sell them a broad range of products and services, from unsecured loans to prepaid debit cards, Mr. Nix said. "All core financial service products will actually increase their sales, as well, because we will have increased customer traffic. … The more you have to offer the consumer, the more products you sell in each different product line."
Kinecta expects the purchase to drive down short-term loan prices in its markets.
The purchase "will have positive, significant impact on the whole industry," said Simone Lagomarsino, Kinecta's president and chief executive. "It will impact competition in the area," because check cashers "will need to lower price levels" to compete with the credit union.
It will take four to six months for the unit and its parent to combine their programs, giving the credit union an opportunity "to learn from the Nix Check employees" and develop new products, Ms. Lagomarsino said.
Kinecta announced the purchase one day after the National Credit Union Administration approved the expansion of its membership area to include areas where the check casher operates.
Other credit unions, including Melrose Credit Union, Actors Federal Credit Union, and Bethel Credit Union, all of New York, have formed partnerships with check cashers to offer more products and services to the underbanked.
Navicert tried partnering with a financial institution for the same reason before selling itself. But two weeks ago Union Bank of California, which is mostly owned by Mitsubishi UFJ Financial Group Inc., sold its 20% stake in Navicert to Kinecta. Mr. Nix said the check casher had not been able to offer regular banking services when it was partially owned by Union Bank, which had its automated teller machines in Navicert's stores.
"Now, more fully with Kinecta, we will be able to offer a broader array of full financial service products," Mr. Nix said.
