As the executive of a bank, a primary responsibility of your role is to effectively manage risk. For some, that means being extremely conservative, while others enjoy a more liberal approach. We’ve added a new feature to our banking business that straddles the line when it comes to managing risk – some find it attractive, others find it not worth the hassle.
Surety Bank has entered the Money Service Business (MSB) market. Yes, that’s right, we’ve entered the check cashing arena. You may have some preconceived ideas about this business and I want to acknowledge that it is quite misunderstood and that even the United States government considers it high-risk. However, I’d like to paint you a different picture. There have been significant benefits for us in entering the MSB world, and I think you might appreciate a different perspective.
You know already that there is a segment of people who simply don’t use banks. In fact, it was reported by The Federal Deposit Insurance Corporation that 7% of households in the United States are considered “unbanked” and another 9% are “underbanked.” There a variety of reasons why a household would find themselves in this position. Some have a sense of distrust for the banking industry, while many others don’t have the basic resources to keep a bank account funded and avoid late fees. Either way, by offering check cashing services at our branches we are able to connect with a whole new clientele.
Under The Bank Secrecy Act, which is a tool used to help curtail money laundering and other potentially criminal activities, the government considers MSBs to be a high-risk business. That said, internet banking also makes the list, and that certainly isn’t something any of us are shying away from. At Surety Bank, we’ve seen the MSB side of our business thrive in a community that clearly has a need for it. And, since many banks refuse to enter the business due to understandable risk aversion, there is very little competition.
At the end of the day, a primary motive for any executive is to turn a profit, and for us becoming an MSB has been excellent for our bottom line. Like with any new product offering we weighed the risks and determined that it was well worth our investment. And now we’ve established ourselves as a resource to the underbanked in our community and are having success with little competition in a whole new field.
Each banking executive will have to weigh the pros and cons of getting into the check-cashing business, but I hope now that you feel a little more informed. At Surety Bank we always try to strike the right balance between our drive toward innovation and our commitment to our community. And I believe that you can achieve that balance too. Feel free to contact me at any time to learn more about our entry in the MSB world.
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