Bill Could Be Bonanza for Industry

By Charlene Komar Storey, Editor-in-Chief

Business will be skyrocketing for check cashers and payday lenders in the near future. At least, that’s the strong belief of Paul W. Eckert, president and CEO of Family Financial Centers.

The force behind the business explosion, he says, is the new financial overhaul bill. Yes, the very same Dodd-Frank Wall Street Reform and Consumer Protection Act that has been causing so much gnashing of teeth is welcomed by Eckert.

“We’re excited about it,” he says, as is his Doylestown, Pa.-based team. “The people we bring in have a different mindset,” he adds.

While many are dreading the potential problems presented by a new federal oversight agency, Eckert is looking in a different direction. He sees the restrictions placed by the bill on banks as eventually moving more customers to non-bank businesses, continuing the movement created by the poor economy.

The latter, Eckert believes, has delivered a strong dose of reality to many consumers, forcing them to accept their true income.

During the boom a few years past, most folks lived as though they were doing better than they really were, he says, because every few years, they cashed out the equity in their homes by refinancing or taking a secondary mortgage.

Now, they actually must live on what they make — and that often means living paycheck to paycheck, and avoiding bank fees.

“What has happened is that the economy has changed the landscape of the industry,” Eckert says.

And although Family Financial Centers is getting ready for the federal government’s move to finalize its move away from paper checks, Eckert isn’t seeing a slide in income from checks.

“The volume of checks has increased,” he says, adding that a lot of people now have two part-time jobs, increasing the number of instruments to be cashed, although the face values are less.

“A lot of people we’re servicing, we’ve never serviced before,” Eckert says.

Positive Changes

Now, he predicts, the new legislation will create more changes that will be favorable to the industry.

As banks see income from overdrafts plummet, they will make up those losses with recurring charges, Eckert predicts. The days of free checking and the like are over. “Charges on consumers will go up drastically, and banks will drive people to us.”

Beyond cashing checks and, in states where permitted, fielding payday loans, Family Financial Centers offer a variety of services customers may have gotten elsewhere in the past.

“I’m a firm believer in customer-for-life, and we want to help people through different phases of their financial life. It will be more affordable dealing with us than using a bank. We can offer them everything that banks can’t,” Eckert says.

While emphasizing that the business remains check cashing-driven, he says that ancillary services give FFCs more traction.

These include such traditional industry stalwarts as money orders, bill payment and money transfer to prepaid debit cards, wireless phone cards, calling cards and home dial-tone service, cell phone airtime, payroll cards and tax preparation, as well as three types of direct deposit and a savings program.

The company has gone beyond these to offer biometric finger-printing programs, gift card swaps, a discount energy plan, family discount medical plans, car insurance lead generation, and debt advice.

“We acquired a competent and ethical debt settlement company,” Eckert says. From there, customers can move into similarly no-nonsense debt repair.

He does believe that short-term payday loans will be a particular target of the new federal agency.  “Payday loans are where regulations are really going to hit,” Eckert says.

While some laws controlling payday loans might work — FFC, as an internal policy, bans rollovers — banning legal short-term loans is foolish, he believes.

“When you try to do something contrary to human nature, it won’t work. Outlawing payday loans, like they did in Ohio — all they’re doing is transferring those people to less savory alternatives.”

But the assault on payday loans will continue. As a result, payday loans won’t disappear, but will be heavily modified, Eckert predicts. Family Financial Centers is working on rolling out traditional installment loans. “It’s taking time,” he admits.

Different Model

While keeping on top of legislation and developing new products, FFC is following its unusual franchise model. While it opens brand-new outlets and has gotten into stores-within-a-store, it still concentrates on buying out established check cashers and turning the operations over to new franchisees.

Most of its 30 franchises (with 10 more to be opened this year) are in first-tier suburban areas, with some in urban settings. The company has converted a wide array of stores, from two former David’s Check Cashing outlets in Brooklyn to one-time bank branches in Hispanic supermarkets in Phoenix. An $18 million Philadelphia store that has had the same owner for a quarter-century is the latest conversion.

The vast majority of franchisees are multi-store operators who also own other businesses. “When they see the business model, they say, ‘This is like a bank branch,’” Eckert says.

That business model allows the company to avoid many common problems, Eckert claims. Take financing. It has helped with three recent SBA deals, he says; these were acquisitions, so the existing cash flow was a big plus in getting the loans.

Internal financing is available; it mostly covers furniture, finance and equipment, but in some cases, such as store-within-a-store hybrids, the company will finance completely beyond the 20 percent to 30 percent down payment. There’s also an investor fund for acquisitions.

Eckert adds that the current economy helps the company is another way: there are lots of good real estate deals available, especially in strip malls. When considering a location for a new store, the company performs a demographic analysis. (With existing stores, current customers are surveyed to learn what they like, and what they’d like to see done differently.)

Many owners of existing stores are getting out because of fear of bank discontinuance, Eckert says. While touting Family Financial Centers ability to offer these individuals a viable exit strategy, he says that’s an overreaction, and again points to changes in the financial landscape: banks facing the loss of so much income will be hungry to renew contracts with check cashers.

As for FFC, it deals smoothly with several banks, Eckert says. “They come in every six months and look at our software updates and the like.” The banks don’t require franchisees to set money aside in a CD, he says. “The system prevents all the problems that cause blow-back from regulators.”

Keeping Customers

Conversions take place quickly, according to Ken Parsons, vice president of real estate, construction and new center development, to keep the business running smoothly. New computer systems are put in place after hours the same day the contract is signed. The cosmetics, all in its blue, gold and white colors, typically are done over the next weekend.

The company prefers to keep the existing personnel. Tellers become accustomed to incentives for signing up customers for ancillary services. But customer service is the centerpiece of the re-training that takes place.

“Our customers like being valued. They like being treated better — and why wouldn’t they?” Eckert asks. “And if you do these things, you’ll feel good about what you do.

“Just because someone makes less money or is in a hard situation dosesn’t mean they’re ‘less.’”

Approach is Critical in Branding, Marketing

By Sheldon Silverman

That ancient Chinese curse, “May you live in interesting times,” may have been directed squarely at the check cashing industry of today.  With governmental oversight and rules becoming ever more prohibitive and encroachment from traditional big box players, such as Wal-Mart, it is harder than ever for the check casher of today to not only flourish, but also to compete effectively.

That said, the current state of affairs in the industry have opened the eyes of many sophisticated check cashing companies to the advantages of effectively branding and marketing their services to the right customers.

The issue has become not if you will market to your customers and prospects, but rather, how.

It is imperative today to create a clear brand messaging strategy that aligns your brand and marketing across all channels.  Along with the well-proven legacy channels such as print advertising, radio, television and email, there is an entire set of new marketing media channels — mobile messaging, social networking, digital out of home networks — that you, as a check cashing operator, need to understand and implement seamlessly.

Over the last 15 years, new technologies have opened up a vast amount of touch point potentials to the marketer.  This advent of new ways to “touch” a customer has also been a Pandora’s Box to marketing executives.

When done correctly, brand/direct messaging through channel integration improves response rates, offers up viral components, enhances the brand equity and strengthens the customer relationship.

Done incorrectly, and the result is more akin to herding cats — in theory it could work, but why do it.

Perception Key

This single facet of multi-touch marketing is so important because consumer perception is key and it is easy to abuse their openness to you as a marketer.  Studies have shown that overzealous marketing turns off customers.  A Yankelovitch Consumer Study found that 61 percent feel marketing is “out of control”, 59 percent say that marketing has “little relevance to me”, and 69 percent are interested in products and services that block, skip or allow them to opt out of marketing.

The “always available” marketability that technology has delivered to marketers has created more “friction” within the marketplace.  This friction causes customers to retract from a meaningful relationship with a marketer if the interaction is not resonant with their needs, life-stage or channel.

So how do you create a “frictionless” relationship with those you are targeting with marketing, and how do you engage in two-way communication that allows your customer to be part of the action?

The key is taking a holistic approach to your marketing campaigns and understanding who your customers/prospects are and how to align your brand campaign message across the proper channels.

This may sound complicated, but by taking specific steps, you can combine the science and art of advertising and marketing and create consumer focused campaigns that your customers embrace and drive your business.

Utilize Technology

While technological advances have promised the ideal of achieving 24/7, 360  relationships with customers, managing this access has created stumbling blocks to a frictionless customer relationship.  CRM is viewed as a technology, while true customer relationship management is a relationship strategy that should effectively utilize technologies, not be imprisoned by them.

Effective customer relationship management that leads to customer loyalty is channel-neutral:

• Loyalty-based initiatives must address each customer channel

• Acquisition campaigns should target the right prospects with the  highest propensity to purchase and engage

• The channels may be divergent, but the message and tone must be   complimentary

• Communications must be tracked across channels so that conflict and  dissonance are not created between messages and timing

• Knowing when to deliver specific messages through each channel is  more science than art

When effectively done, brand and direct channel integration promises the frictionless customer experience and removes any barriers to commerce, provides an interaction that is painless, and enhances the loyalty drivers for your customer.

Case History

The best way to illustrate brand integration strategies in the check cashing industry is to share a successful example from the I.C.E. Visa Prepaid Card (International Cash Exchange Card, LLC). Created and deployed by I.C.E.’s ad agency, Liquid Marketing Inc., the integrated brand and direct campaign employs multiple touch-points that include traditional and new, digital media and focus on extending the brand to the in-store experience.

From the first launch of the card in 2006, a major focus has been on consumer-directed marketing and ways to assist the check casher with both selling the card and increasing usage.  A key component is a very strong branding initiative, which I.C.E. pushed into the marketplace to drive traffic to the check casher.

In 2010, I.C.E. launched an interactive text-messaging  campaign to increase new prepaid debit card sales at check cashing locations as well as driving on-going usage of those cards.  The first step was deciding who the best prospects were to target.

By looking at the existing best customer and prospect demographic and building a comprehensive demographic model, we were able to pinpoint the neighborhoods and commuter routes of these target consumers.  With this information in hand, we deployed the SMS Campaign creative into the marketplace.

The out-of-home marketing pieces included billboards, interior & exterior bus insert signs, train station boards, an I.C.E. truck wrap and a branded Twitter page.  The creative offer incentivized the consumer to text ICE1 to 99158 for a chance to WIN $100 or a FREE I.C.E. Visa Debit Card.

Each month, I.C.E. randomly selects 10 winners of the $100 promotion and all of the rest of the customers receive a text coupon for a free load onto their I.C.E. card.  Both the outgoing texts (winning and conciliation) serve to lure the I.C.E. merchant locator to find the nearest I.C.E. check cashing location to redeem.

Once the customer is inside the store, the next step is for the in-store experience to strongly support your “out-of-home” efforts.  In the case of I.C.E., posters, standees, window decals and counter mats all push the I.C.E. brand at the point-of-sale.

Greater Levels

If the check casher wants to take a marketing campaign to the next level, one of the most engaging in-store platforms is the screens and hi-def TV ads created for the iCASHtv in-store digital video system designed specifically for check cashing locations.

The state-of-the art system, a commercial grade large screen LCD and in-ceiling speakers, allows the check casher to push not only their brand, but also their services and products, like the I.C.E. card, MoneyGram, Western Union, etc.

iCASHtv cuts through the clutter of the traditional in-store experience and captures the customer at the point of sale — allowing the customer to ask about, or request the card, rather than relying on the teller to sell the service.

Since launching the program in 2010, I.C.E. and its partner check cashers have seen a dramatic up-tick in card sales and card loads that coincide with the monthly SMS text messaging coupons.  With the great success of the promotion, I.C.E. is currently planning to expand the campaign and its frequency into other markets.

By embracing modern customer marketing channels and the ability to connect the brand with the check cashing customer, our industry can better embrace the new environment and learn to compete against the non-traditional players that are encroaching on the check cashing industry at every turn.

The question can no longer be “should I advertise my brand and service”, but rather how can I use advertising to better reach and keep my prospects and customers.

Sheldon Silverman is the CEO of SmartBomb Media Group / iCASHtv Network and serves as Board Advisor to International Cash Exchange Card, LLC. He will be leading a seminar entitled “The Ideal Customer Experience – Harnessing In-Store and Mobile Marketing to Increase Share of Wallet” at the FiSCA 2010 convention in October.