After repeated delays, CheckSpring Bank, a New York City start-up that plans to make check cashing a core service, has secured the necessary capital and hopes to open its first branch, in the Bronx, by October.
CheckSpring, which plans to serve primarily the underbanked, wanted to open in spring 2006 but could not raise the requisite $13.4 million in time. State regulators extended its deadline to July 2006, but CheckSpring failed to raise the capital by then as well.
Last week, however, CheckSpring said it had overcome the initial investor hesitation and raised $17 million.
"Capital raising had its challenges," Charles R. Wilcox, the president and co-founder of CheckSpring Community Corp., said in an interview last week.
"Traditional bank investors like traditional banks," he said. "So it took a little while to find our investment audience, but we were able to do so successfully."
Though Mr. Wilcox said CheckSpring would price its check-cashing services "competitively," it may have to do more to get consumers' attention in the Bronx.
Check-cashing fees are capped at 1.64% in the state of New York. Bank of America Corp., which has several branches in the Bronx, charges people who do not have a B of A account a flat $5 check-cashing fee.
Mr. Wilcox said CheckSpring would roll out a number of services in addition to check cashing.
These could include a payroll card, a debit card that would draw on CheckSpring deposits, and alternatives to tax refund anticipation loans, he said.
CheckSpring also hopes to form partnerships with Ariva Inc., a nonprofit offering financial literacy programs and free tax-preparation services, and PayNet Deposit, an alliance of check cashers and credit unions that offer convenient deposit and savings services, mostly to the underbanked.
A relatively wide menu should help CheckSpring establish itself as a commercial bank in a part of the city that offers very few banking services, Mr. Wilcox said.
"Those services are about ease of understanding, they're about liquidity, and they are about convenience" for the underbanked in "one of the places that has the lowest density of banking in the Bronx," he said.
Though CheckSpring is branding itself mainly as a provider for the underbanked, Mr. Wilcox differentiated it from credit unions and from other check cashers. It will offer a "full range of commercial banking products."
Unlike some large financial institutions that have struggled to sign up the underbanked, CheckSpring understands its target audience, Mr. Wilcox said.
"Any check casher will tell you their clientele doesn't want banking," so banks must find nontraditional ways to attract underbanked consumers, he said.
He said an investor whom he would not identify provided CheckSpring with the start-up funds. About $13.4 million has been allotted as working capital to fund loans; the remainder will pay for costs such as overhead.
CheckSpring is not in the clear yet. It has received tentative approval from the New York State Banking Department to open the Bronx branch, whose site is about 10 blocks from Yankee Stadium, but it is still waiting for approvals from the Federal Deposit Insurance Corp. and the Federal Reserve Bank of New York.
