Targeting underbanked consumers in the United States, US Alliance Group Inc. and Chexar Networks Inc. have launched a check-cashing product that enables consumers to deposit checks directly into accounts tied to MasterCard-branded prepaid cards, US Alliance Group announced on Dec. 15.
Chexar Networks, a Roswell, Ga.-based check-casher and guarantee-service provider, is providing US Alliance Group with the databases to verify each check is legitimate and will handle all underwriting services.
US Alliance Group is piloting the product at several large U.S. retailers, Fadi Cheikha, the company’s CEO tells PaymentsSource. Cheikha declined to name the merchants.
The service enables consumers to cash any type of check using a check-cashing kiosk deployed inside participating merchant locations, Cheikha says. The retailer’s staff operates the stations, he adds.
If it is the first time a consumer has cashed a check at one of the kiosks, the clerk will enroll the consumer into the program and collect various information, such as the applicant’s address and date of birth, Cheikha says.
When using the service thereafter, consumers present their check to the clerk at the check-cashing kiosk and provide a form of identification, such as a drivers’ license or passport, Cheikha says. The clerk also asks them a variety of questions regarding the information from their account to verify their identities before running their checks through the machine, and Cheikha says.
The machine sends the check information to Rancho Santa Margarita, Calif.-based US Alliance Group’s data center, which determines whether to accept or decline the draft, Cheikha explains.
If it accepts the check, the company loads the entire amount into the card account. Consumers may use the debit card to shop wherever MasterCard is accepted or to withdraw cash at any Cirrus ATM, Cheikha says. Cheikha did not say whether any fees were associated with using the card.
Consumers may only load up to $5,000 into the card account at one time and may withdraw up to $4,000 per day, he notes.
During the pilot, consumers are not paying a service fee to cash checks, but users of the service eventually will pay a fee based on the check amount and type, Cheikha says. The kiosk also is free for merchants to use, or they may buy it from US Alliance Group, he adds, declining to comment on specific fees or machine prices.
The ability to cash a check and place the funds into a prepaid card account is not new, but the concept is a good one, says Gwenn Bézard, research director at Boston-based Aite Group LLC. But many companies such as US Alliance Group should ensure they have the correct details to verify whether a check is legitimate to avoid declining most checks, Bézard says.
Moreover, US Alliance Group may face competition because consumers already may cash checks at check-cashing stores and at various merchant locations, such as Wal-Mart Stores Inc. stores and most grocery stores, he notes.
Moreover, “it may be hard to convince consumers to switch to this option from their usual check-cashing method,” Bézard adds. “But if US Alliance Group can find merchants committed to using the product, then the company will have a shot in the industry.”
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