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T-Mobile Jumping Into the Check-Cashing Industry
An anonymous reader writes "T-Mobile has made headlines recently for trying to change the cellphone industry's reliance on contracts that lock customers into a particular carrier. Perhaps surprisingly, they've been fairly successful. Now, they're jumping into another industry plagued by high, customer-unfriendly fees: check cashing. 'Specifically, T-Mobile is hoping to offer an alternative for the 70 million or so U.S. adults that either have no bank account or have some bank services but still rely somewhat on check-cashing or payday-loan services.' How will they do it? 'Through the combination of a smartphone and a prepaid Visa debit card, T-Mobile (and its banking partner, Bancor) aims to offer many of the services typically offered through a bank, including check cashing, direct deposit and bill pay. The service, dubbed Mobile Money, allows customers to purchase and reload the card at more than 3,000 T-Mobile stores and, eventually, at Safeway and other retail stores. They can use the card anywhere Visa is accepted, and can also withdraw money, without a fee, at 42,000 ATMs across the country. Mobile Money customers can enroll in direct deposit for payroll, and personal checks and other types of checks can also be deposited by taking a picture of the check using the smartphone's camera.'"
Most banks have gotten to the point that they only offer free checking if you use direct deposit. If you deal mostly in cash or work for a small company that cuts paper payroll checks, you're not left with a lot of free options.
Look at the economy. Where is it compared to years prior? Where is it going? The poor are increasing in numbers for a wide variety of reasons. They are *the* growing market. To not find a way to serve them would be ridiculous.
The European banking system (T-Mobile originates in Germany) is highly competitive. Checks basically don't exist anymore. You can still use them, but nobody wants to, because the alternatives are much more comfortable and reliable. I can only imagine that the people at T-Mobile are constantly thinking "WTF? Does nobody realize how unnecessarily complicated and expensive banking is in this country? Why isn't anybody doing something about it? Maybe we should do something about it."
Checks in the mail. Seriously, folks?
There are a huge humber of people in the US who are simply unable to get a bank account. As far as the banking system is concerned, they do not exist. Ever see the movie, Elysium? It's like that.
It is tough to see when one is a privileged rich kid. I only learned about it when I picked up an interest in bitcoin and heard someone speak about what it meant for the poor to be able to hold wealth without a bank account and without having to carry cash.
I'd be less cynical in this particular case: it looks like a genuinely innovative bit of middle-man work, which could serve its target audience better than the current solutions. (If it doesn't, it will of course fail.)
PayPal was an innovation at the time it was new, and served its users better than anything else out there. T-Mobile's new idea looks similar: it aims to serve customers in a way banks are for some reason reluctant or unable to do.
There is a place in the world for these 'middle-men' roles.
Check cashing is there for undocumented people (who can't provide the basic information to get an account, but are occasionally paid by check). I actually used to work for a bank (one of the larger US ones) that owned a Check Cashing business and they used to send someone out to the day laborer sites on paydays to facilitate the process.
It's about as predatory of a practice as you can get and even the company that owned these check cashing locations knew that it was scuzzy. I remember getting a vibe when working with the head of the check cashing organization that he'd been breaking legs in a former profession.
Maybe T-Mobile can do this right, but it's an industry built on taking advantage of the fact that someone can't use a free service. I don't see how it could be possible to do it right.
In the US, most banks have free checking accounts
Citation needed.
I haven't seen a free checking account in ages. Some of them can be free, if you meet certain qualifications, but I seriously doubt there's any truly free ones out there any more. At the very least, they usually have a minimum balance requirement; at my bank, it's $100 for their lowest-level checking account. If you drop below that at any point, they sock you with fees. Poor people can't handle an account like that because they won't be able to keep up the minimum balance; at some point, they'll need the money NOW and their balance will drop, and that $8 fee will really hurt them. That's why they're called "poor": they can't afford an $8 service fee every month because some multibillion dollar bank wants fees on top of the interest they get for holding peoples' money.
It wasn't always like this. Back in the 80s (a much better time than now, in most respects), bank accounts were usually free, had good interest rates, and there were no fees for almost anything. Even though ATMs were brand-new technology, they were really reliable (no BSODs then), AND you could use other banks' ATMs, without a fee!
Since it would seem that most /. folks are unaware, allow me to explain exactly why many folks don't have bank accounts -- it's simply that due to onerous fees, if/once someone makes a mistake, their existing bank piles on miles of crap fees until such time as the account, through little to no direct action of the customer, ends up irreparably into a negative balance; one of my own employees went negative by about $20, and within 3 months, through no further action by him, he was told his account was something like -($200.00). While this might be a simple problem in a pure competitive capitalistic system, aka GO TO A COMPETING BANK AND SAY THE HELL WITH THE BOGUS FEES, nowadays the banks prevent this by sharing the information -- so if you screw up at one bank you are truly blacklisted at ALL OF THEM, regardless of the legitimacy of the original infraction. Anymore, my understanding is that ALL BANKS are tied into this database, and it's private, and not regulated like the credit reporting system.
For more reading enjoyment, I found this:
http://dealbook.nytimes.com/2013/07/30/over-a-million-are-denied-bank-accounts-for-past-errors/?_php=true&_type=blogs&_r=0
Seriously, if you are so far above the line that this occurs at that no one you know falls below it, you are a hell of a lot better off than you think.
The problem with middle class is for some reason they seem to think that is what poor is, and cannot conceive of someone worse of than them.
I started off poor. I grew up moving from eviction to eviction. bank accounts were simply not an option for my mother, she had floated checks to try and stave off evictions. We went hungry often. A night with no food, or maybe a package of crackers to share, was common- at least once a week, and often more.
The road up from there is steep, and many do not make the climb. College was not an option- too poor to afford it, not poor or minority enough to get scholarships. Grants that were available would not cut it- and the aforementioned poverty and evictions meant no student loans for us. Constant moving meant a school history that does not bring the scholarships flocking. Sports? Who has time to excel at sports when finding supper is the priority? The military was my only hope, and even that was iffy - could I get a training that will translate to decent civilian jobs? (spoiler- I did.)
I am middle class now- upper middle to be honest-, but that was a very gradual climb taking over 20 years.
But I do recognize how far I have climbed and DO understand the people still struggling at the bottom are not there because they are lazy bums.
A car is a necessity for having a job in much of the country.
But that's the neat thing about being a Social Darwinist. You get to sneer at the poor applying for food stamps because they should get off their lazy asses and get a (second) job to pay for food and housing. But when they buy an 87 Escort, because they have to have transportation to get that job and that was the best car they could afford.....
......you get to sneer at them a second time for having a "luxury item" when they get hit with a $200 repair bill!