A bank set to open this spring in a predominantly Hispanic neighborhood in New York’s South Bronx will try to attract customers by operating as a check casher too.
Though other banks own or have stakes in check cashers, CheckSpring Bank would apparently be the first in recent memory to offer full-fledged check-cashing services from bank teller windows.
Its organizers are betting it will convert unbanked people into banking customers.
“That is the key to our model,” said Charles R. Wilcox, the president chief executive of the parent CheckSpring Community Corp. “We’re going to cash checks for a fee. It will be lower for depositors, and it will get even lower as people’s balances grow, so we’re building incentives to save.”
CheckSpring will focus on blue-collar and low-income people who are not served well by traditional banks, Mr. Wilcox said.
The most similar current service may be one offered by the $91 billion-asset KeyCorp of Cleveland. In a pilot program, a handful of its Cleveland-area branches have begun cashing noncustomers’ payroll and government checks.
A few other banking companies have bought stakes in check cashers and are marketing bank products in their stores. These include the $51.3 billion-asset UnionBanCal Corp., mostly owned by Mitsubishi UFJ Financial Group Inc. of Tokyo.
The San Francisco company’s Union Bank of California has installed teller windows in Nix Check Cashing stores so people can open accounts and apply for loans there. Last month Tom Branch, the head of alternative financial services at UnionBanCal, said about 40% of Nix’s check cashing customers become Union Bank of California depositors.
CheckSpring has leased space in a building on East 167th Street a few blocks from Yankee Stadium. Mr. Wilcox said that he expects many people in the neighborhood to open accounts right away, but that persuading many others will take time.
“A lot of people are going to be on the fence, but if we give them good service, we can bring them into the fold,” he said.
Banks largely abandoned the South Bronx in the 1970s, when politicians including President Carter called it a classic example of urban decay.
Now construction and new small businesses are luring banks back, said Adolfo Carrion Jr., the borough president. “Branches are opening up throughout the borough,” he said Tuesday. “There is definitely a sense that this is a growing community; whoever misses the boat now is missing out on a tremendous opportunity.”
The last time a new bank opened with headquarters in the Bronx was 1982, and the borough still has the lowest ratio of branches to residents — about one to 11,100 — in the city. (The ratio in Staten Island, by contrast, is one branch per 5,000; in Manhattan it is one for every 2,500 people.)
Though 35,000 families live within half a mile of the space CheckSpring has leased, “it is a half-mile to the nearest branch,” Mr. Wilcox said.
“In New York, that is a long way to go without passing a bank,” he said. The disparity with other parts of the city “is amazing.”
Mr. Wilcox is a former vice president for strategic development at Citigroup Inc. Last week CheckSpring Community Corp. said it had hired Gerard A. Perri, the chief financial officer at the $360 million-asset Metropolitan National Bank, in Manhattan, to be CheckSpring Bank’s president and chief executive.
The state Banking Department has approved CheckSpring’s charter application, and the Federal Deposit Insurance Corp. has approved its application for deposit insurance. Mr. Perri said raising initial capital is the last hurdle.
The plan is to start with $13.4 million in capital, and Mr. Perri said the organizers hope “to open as early as possible in the second quarter.”
“As soon as we get the cash we want to put it to good use in the community,” he said.
Joe Coleman, the president and chief executive of Rite Check Cashing Inc. in New York, said Thursday that he will be watching CheckSpring’s effort closely. “I’m very curious to see how it works out,” he said.
Rite Check operates seven stores in the Bronx. Mr. Coleman said CheckSpring will face the same challenge as other banks that have moved into low-income urban areas: that the people it wants for customers value cash in hand more than savings.
“Check cashers succeed because we market liquidity in an area that needs it badly,” he said. “I don’t think the fact CheckSpring will have a bank aspect will take many customers away from me. My most successful store has four banks around it, and all four are willing to serve low-income customers.”
Mr. Wilcox said CheckSpring will serve small businesses in addition to individuals. It will target stores and other businesses with sales of less than $2 million, he said.
“When you boil it down, we’re a pretty standard community bank play,” Mr. Wilcox said.
