Check Cashing, Money Transfer, Payday Loan Services Are Booming, Catering To The “Unbanked”

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New market study forecasts $15.4 billion market to grow 8% per year to 2008.

Marketdata Enterprises, Inc., a leading independent market research that has tracked niche service sectors since 1979, has released a new 104-page report entitled: Check Cashing, Money Transfer, Payday Loan Services & Pawnshops: A Market Analysis. Fully 35% of the U.S. population, or 12 million households, is “unbanked” (maintains no checking or savings accounts with mainstream banks), and utilizes “alternative financial services” such as: check cashing outlets, payday loan outlets, money transfer services, and pawnshops--which are increasing in number across America. See for details or to order the study.

“Large banks have limited hours and restrictive loan policies. People with bad credit or no credit that need cash quickly due to unexpected car repairs, medical bills and other events prefer using these alternative services. They are not asked about their credit records, and if they have a regular job they can get their payroll, government or personal check cashed, or get a short term loan quickly—for a fee. Most users gladly pay these fees for the more convenient hours and ease of use, but consumer groups and others criticize these services for the steep fees they may charge”, according to Research Director, John LaRosa.

Major Findings:

  • In the United States, there are now 11,300 check cashing outlets, 22,000 payday loan stores, 335,000+ money transfer agents (worldwide), and 11,800 pawnshops. The number of payday loan stores in particular has soared 400% since 1999. Many check cashing outlets and pawnshops have added payday loan services in recent years. Payday loan services have come under the greatest scrutiny for their practices. This is the youngest segment of the industry.
  • Marketdata estimates that the four total combined businesses generated $15.4 billion in receipts in 2004. Revenues are forecast to grow 8.4% annually for the group as a whole to 2008.
  • Check Cashing was a $1.68 billion industry in 2004 that is loosely regulated by the states. The average fee is 3-4% of a check's value, but many in the market are concerned about the entry of Wal-Mart as a new competitor. The typical outlet only grosses $149,000 per year. More competition is coming from mobile vans that travel to worksites, self-service machines, pawnshops, and payday lenders.
  • Payday Loan outlets soared from 5,000 in 1999 to 22,000 today. This is now a $4.74 billion industry. The top three chains are publicly-owned companies that operate 3,000 outlets. They capture a major share of receipts. Payday lending is a relatively new business that took off in the late 1990s. Receipts are growing nearly 15% per year.
  • Money Transfer Services is a booming business, growing 80% since 1999 to $4.1 billion in 2004. It has grown by serving immigrant workers in Texas, Southern California and other states that wire money back home to Latin America and elsewhere. It is dominated by two big players—Western Union (First Data Corp.) and Moneygram (Viad Corp.). These companies compete with banks and the U.S. Post Office. Since the 9/11 attack, stricter regulations and tracking of money transfers have been implemented by the U.S. government.
  • Pawnshops is a slower-growing but sizeable business. Nearly 12,000 stores generated $4.87 billion in receipts last year. This business is fragmented and concentrated in the Southeast and Southwestern U.S. states. The average loan is less than $100 and it's collateralized by merchandise, usually jewelry. Pawn loans comprise 40% of a pawnshop's revenues, with 60% coming from merchandise sales.

Main reasons why many consumers don't use traditional banks include the following: they don't write enough checks to make an account economical, don't trust/don't like dealing with banks, don't have enough money, and service charges are too high.

“Mainstream banks and large financial institutions such as Wells Fargo, Banco Popular, and Union Bank of California have been lured to the unbanked market by its high growth rate. They go so far as to reach out to the community via mobile check cashing vans that visit local factories and worksites. Customers of alternative financial services are NOT just the poor. Due to historically high household debt levels, many more middle income consumers find themselves squeezed from payday to payday. They also like these outlets' longer and weekend hours and less onerous credit policies”, according to Research Director, John LaRosa.

About The Study

The U.S. Check Cashing, Money Transfer, Payday Loan & Pawnshops Industry, June 2005, is a 104-page multi-client study that costs $1,395. There is a 10% discount for online orders. Single chapters are available at lower cost, and the study is available in print or digital format. The study contains 48 detailed tables. Competitor profiles provided for: ACE Cash Express, Dollar Financial, First Data, Advance America, Vigo Remittance, Cash America, EZ Corp., First Cash Financial, World Acceptance, and QC Holdings. For each of the four markets, Marketdata analyzes the nature of the business, emerging trends, customer demographics, state/federal regulation, market size for 1999-2004 and 2008 forecasts, and major competitor profiles. Information was obtained from proprietary Marketdata research/phone interviews, industry trade groups, major brokerage firms, consultants, and special reports.

Contact Information:

John LaRosa, Research Director

Marketdata Enterprises, Inc.


Fax: 813-931-3802

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