Cash-Only Customers

As surprising as it may seem, there are millions of American consumers who either have no relationship with a bank or only have a savings-account relationship, with no access to a checking or debit account. But a shopper without a bank account or credit card could be among a retailer’s most loyal customers.

The United States Federal Deposit Insurance Corp. (FDIC) has estimated the number of unbanked consumers to be approximately 28 million people. What is not surprising is that these same consumers have all the purchasing requirements of the fully banked consumers—and they likely have the cash in their pockets to complete a transaction.

Although conducting business the old-fashioned way, with paper currency and coins rather than plastic cards and electronic transfers, is not necessarily a negative for the merchant, it can pose hurdles for the consumer.

For instance, a survey by Opinion Research Corp. conducted in May concluded that debit- or credit-card payments were both more convenient and easier than cash. (See the news item on page 168 about consumer payment preferences for quick-pay debit or credit cards in quick-serve restaurants.)

Retailers and issuers of credit cards are stepping up to the plate to make sure that unbanked consumers have the same opportunities to use plastic that the majority of Americans enjoy. Prepaid payment cards are the hottest tickets in town, and reloadable services are enhancing the rave reviews.

Earlier this summer, Wal-Mart partnered with Visa and launched a branded prepaid, reloadable debit card targeted specifically to its customers without bank accounts (

Last month, MasterCard announced an agreement with Los Angeles-based Green Dot Corp. to expand the ability of consumers to reload the branded rePower MasterCard through the Green Dot network of more than 40,000 retail locations nationwide, including Wal-Mart, CVS, Walgreens, Rite Aid and RadioShack.

Green Dot, which has similar agreements with Visa and Discover, also offers a cash-processing service, MoneyPak, that allows consumers to load cash to prepaid cards, use cash to pay bills and add cash to a variety of accounts.

At retailers such as St. Louis-based Save-A-Lot, a large percentage of customers do not use conventional banking methods. A spokesperson for the value-oriented, deep-discount grocer told Chain Store Age that the share of its customers who do not have a conventional banking relationship is higher than the U.S. average and the retailer feels a need to meet the needs of this customer.

Save-A-Lot partnered with Atlanta-based CheckFree Corp. to offer its shoppers a walk-in bill-payment service as a way to serve the unbanked population as well as to increase traffic in its more than 1,150 stores.

The service, CheckFreePay, provides a secure, electronic transaction from the store’s customer-service center to billing companies such as MasterCard, Visa, utilities and cellular-phone providers.

Although customer-service centers were not originally part of the Save-A-Lot format, the company spokesperson said, “to meet the changing needs of our customers, we are retrofitting two stores per week with Service Centers. We explored putting the money services inline at the front end point of sale, but it just isn’t feasible to expect other customers to wait to check out while someone is paying bills.”

In addition to the CheckFreePay service, Save-A-Lot also provides check-cashing, wire-transfer and money-order services. Most grocery stores, convenience stores and mass merchandisers offer comparable money services, so walk-in bill-payment services and reloadable prepaid cards are natural extensions to the product mix.

Steve LaBella, CheckFree’s VP, agent business unit executive, noted that 60% to 65% of its retail customers indicated they had experienced increased sales as a result of adding the bill-payment service. Although the service itself typically carries a nominal flat fee, ranging from 25¢ on the low end to a high of $2.50 per transaction, the revenues generated from the service itself are not significant. However, providing the service attracts consumers who appreciate the convenience of one-stop shopping/services and who make other purchases while in the store to transact their personal business.

Retailers have two options for deploying the CheckFreePay service. Like Save-A-Lot, they can install a small PC terminal, which is provided by CheckFree at no cost to the retailer, in their customer-service center. Or, the service is available as a Web-based application that can be implemented at a POS register or any Internet-enabled location in the store.

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