Check Cashing or a Money Service Business (MSB) seams like a no brainer for lots of retail, grocery and convenient store chains but the barriers to entry can seem complex and unknown. If you are compelled to begin developing a check cashing business for your organization start with these 5 critical considerations below.
1. Registration, Licensing and Compliance
Get a business license. In addition, you will need to understand your local, state, and federal licensing requirements. Review FinCEN’s list of state regulators or go to your state government website to determine if they regulate check cashers. Rules always vary state to state, especially if your primary business is not check cashing.
Registration is critical as well. “Any business classified as a Money Service Business, which includes those conducting money transactions in amounts over $1,000, need to register with FinCEN (The Financial Crimes Enforcement Network).” If you just want to do wire transfers, regardless of amount, than you will be classified as an MSB. FinCEN is a huge resource for getting the information you need to get forms, guidance and support materials.
Lastly, as it relates to compliance, you will need to develop an anti-money laundering program and designate a compliance officer within your organization. Check out AML Help to get some guidance on those compliance areas. Lastly, it is critical to understand your local and state check cashing database requirements. The State of Florida requires check cashers to interface with their check cashing database as a requirement to cash checks in their state.
The Florida Legislature passed House Bill 217 during the 2013 Session which amended Section 560.310, F.S. to include additional requirements for licensees requiring the use of a statewide real-time database in which pertinent information regarding check cashing transactions be captured to combat fraudulent check cashing activity. This site represents the primary access point to the Florida Check Cashing Database.
2. Does A Check Cashing Prospect Fit My Target Market?
This is a powerful question and one you should evaluate and consider when putting together your check cashing business strategy. Sure revenue opportunities and increased customer traffic are a major draw for your business but if you cater to an affluent target market you might want to look at what types of prospects typically fit the check cashing profile that might bring an entirely different segment to your business. You can read the 2015 FDIC National Survey of Unbanked or Underbanked households study to learn more about the demographics of the underbanked and unbanked population in the United States and see how it relates to your business’ target market.
3. Understand Fraud and Cash Concerns
A very robust, secure and seamless check cashing software solution is the best way to mitigate the fraud associated with check cashing. vCASH is one of various products on the marketplace that can you maintain customer data, interface with state databases, perform simultaneous transactions, interface into various hardware that you will need and perform the proper risk mitigation controls you will need to verify checks, makers, and guests giving you fraud prevention techniques that will help secure your business. Read our “What should you look for in a check cashing software” article to learn more about the things to consider when vendor shopping for a solution that best suits your needs.
Offering services that require a lot of cash on hand can present your business with some challenges. Cash safes, Cash dispensers, cash drawers are all hardware solutions that you can have on hand to protect your cash. Also allowing for electronic deposits and prepaid cards can help limit the amount of cash you need on hand.
4. Discuss with your Banking Relationship
If you have a good relationship with your organization’s bank it is in your best interest to discuss your check cashing business opportunity with them. Why? Because they may have concerns about your cash reserves required to operate your check cashing business. Plus banks are typically risk adverse and sometimes they might take issue with accepting third-party checks.
5. Develop a Return on Investment Business Case
vCASH can help you with this if you are not sure where to start with the return on investment calculation. Feel to contact one of our reps today. The critical point is that understanding your revenue potential versus your upfront and annual expenses is smart. Once you have done this evaluation decide if the investment into this business offering is even worth it or not.
How do I Move Forward?
While there may seem to be some hefty barriers to entry to become an MSB check cashing is still a great way to offer underbanked and unbanked consumers financial service needs while giving your business a competitive edge in your marketplace. Revenue growth from fees, customer growth, and more items purchased in store all generate more money to your bottom-line and can be worth the steps required to cash checks in your business.CALL US TO HELP GET YOU STARTED!