What we found during our investigation of users of UK cheque cashing services

5 Jul 2017 By Carl Packman, Research and Good Practice Manager at Toynbee Hall

Today marks the release of our new publication: Cheques and Balances: An investigation into the use of cheque cashing services in the UK. The primary purpose of this report is to look at the use of alternative financial services, in this case third party cheque cashing, particularly in the context of cheque imaging, and what impact this might have on cheque cashing customers. However there were a number of additional issues raised during the project.

For instance in the course of doing the research, which includes a unique analysis of survey data generated from cheque cashing customers, in-depth interviews to explore the customer profile of this service, and whether faster cheque clearing times will impact customers’ choices, we found a lot out about how people manage their finances more generally, and their particular means of managing primarily using alternative financial services.

We found for example that 60 per cent of cheque users who currently use the services of cheque cashers are prepared to continue to pay to cash their cheques, even if the price they have to pay increases in the future – which is a possibility if cheque imaging reduces the unique selling point of cheque cashing services, namely to reduce the time people have to wait until the principle of a cheque clears.

In fact having the ability to cash a cheque immediately is seen as the main reason for people using cheque cashing shops, with the next most popular reason that individuals did not have a bank account. In fact, of those who used cheque cashers on a regular basis (once a month or more), 58 per cent did so because they didn’t currently have a bank account, but only 2 per cent of respondents saying it was because they didn’t want to open a bank account.

The fact that so many people who use cheque cashers do so because they do not have a bank account – and pay for them, which they intend to do whatever the impact on cost to that service – means that the impact of cheque imaging won’t necessarily be huge for a particular demographic type.

To be clear, of the customers we spoke to 29 per cent were in receipt of benefits or a pension, 15 per cent earned £13,000 or less (as individuals, not households), 25 per cent earned £13,000 to £20,000 and 27 per cent earned between £20,000 and £30,000. Only two respondents gave incomes above £30,000.

That being said, the reduction in waiting times which cheque imaging will guarantee for people who use/are paid by cheque (23 per cent of cheque recipients are in the DE socio-economic group – which includes semi-skilled and unskilled manual occupations, the unemployed and lowest grade occupations) is clearly appealing: 58 per cent of respondents liked the idea of being able to get the value of their cheque by the next weekday via a bank account, whilst 47 per cent liked the idea of being able to use a smartphone to pay a cheque into their bank account.

Cheque cashing has previously been lumped in with discussions around high cost credit, namely payday lending. There is a good reason for this: often you can access payday loans in the same shops as you can carry out cheque cashing transactions.

However this report demonstrates that the customers of payday lending and cheque cashing tend to be rather different, and the customers experience/brand loyalty tends to be different, too.

One of the main advantages, as far as customers we spoke to are concerned, of cheque cashing is that it can be used as a one-stop shop: if you want to access the value of a cheque, send money abroad, buy phone vouchers, and pawn off items in one place quickly then you can do so. If you’re time-constrained, which many of the people we spoke to are, then this matters. In some instances this matters more than the premium paid for using such services.

The implications of this are quite important for the general conversation about financial capability and financial exclusion today: are there things that some people value more than the costs of services?

Join Carl Packman for a discussion on the findings of this report in a Webinar on Wednesday, 12th July at 9:30am. Follow the link here: https://www.eventbrite.co.uk/e/findings-from-an-investigation-into-the-use-of-uk-cheque-cashing-services-tickets-35915482174