LOS ANGELES If you live in a big U.S. city, you probably whiz through an intersection like this one all the time.
On the southeast corner of South La Brea Avenue and West Pico Boulevard sits a payday loan shop. In the same strip mall is a 7-Eleven that sells financial products to consumers who don't have bank accounts. And just to the west is a check cashing store. Taken together, these nonbank retailers form a mini-financial hub for residents of a hardscrabble neighborhood that abuts the showy wealth of L.A.'s West Side.
At lunchtime Wednesday, all three stores were doing a brisk business. Inside an Ace Cash Express location, a clerk asked an elderly customer, who was leaning on a walker, for his address. It was a question without a good answer. "Right now I'm in the hospital," the man explained.
On a more typical day, I might have been one of the motorists driving past this corner without much thought. But today I was here as part of a team of white-collar types who were trying to walk in the shoes of the unbanked. We dressed down, but our efforts to blend in only went so far. In a move that verged on self-parody, we'd arrived at La Brea and Pico in a chauffeured town car.
The exercise was organized by the Center for Financial Services Innovation, a Chicago-based organization that gets support from various banks and foundations, as part of "Emerge: The Forum on Consumer Financial Services Innovation," a three-day conference held by the center and American Banker focused on improving consumers' financial health.
We'd been given a series of tasks to complete: buy a prepaid card, purchase a money order, cash a pair of checks and so on.
Every transaction took longer than it seemed like it should, but still, our money quickly started to dissipate. We were charged $6.15 to cash a $105 check, then another five bucks to send a $40 money transfer. In one store, we peered at the fee schedule posted on the wall: to borrow $100, we'd pay $17.64, which translates to a 460% annual percentage rate on a two-week loan.
It all brought to mind James Baldwin's famous quote: "Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor."
Some of what I saw surprised me, even though I frequently write about financial services for the unbanked.
First, it looks to me like it will be a long time before check cashing and the various related financial services become fully automated.
The 7-Eleven store that we visited had an ATM that customers can also use, at least in theory, to cash checks and receive money transfers. The process didn't work for our group. The ATM took our photo, and instructed us to make a phone call to complete the registration process. But after being transferred twice, we eventually gave up.
The Ace Cash Express store had no self-service kiosks, just an old-fashioned queue to speak with a clerk. When we got to the front of the line, it became more apparent why many stores in this industry look like dinosaurs: we had to provide a lot of detailed personal information in order to complete some fairly simple transactions.
Later, when we walked into a nearby JPMorgan Chase (JPM) branch, the contrast was striking. Customers were directed to touch-screen kiosks. The teller window was hidden in the back, completely out of sight to most visitors.
Another surprise came near the end of the day. While we'd been trying to complete our various transactions, one member of our team, perhaps naively, had turned over a raft of personal information, including her Social Security number and her date of birth.
Later we spoke with an entrepreneur who knows the payday loan industry inside and out. He said that it was a mistake to trust the store with sensitive personal information. "You'll have a fun bombardment of offers," he said sarcastically.
In the end, the distance between the actual customers of these stores and gawking interlopers like me seemed vast.
The abundant signs printed in Spanish attested to the difficulty many recent immigrants have in opening bank accounts. Other customers have lost their banking relationship, and probably aren't getting a new one anytime soon.
One older man was talking on his cellphone while he stood in line at the check-cashing store. "I didn't write that check," he said, over and over again.
Kevin Wack is a Los Angeles-based reporter for American Banker, a Collections & Credit Risk sister publication. The views expressed here are his own.