U.S. Check Cashing, Money Transfer, Payday Loan Services and Pawnshops: A Market Analysis

 

Table of Contents

 

                Page

 

Introduction: Study Scope, Sources, Methodology                                 1-5

                                          

 

Executive Summary - Nature & Definition of the Industry  ($175)      6-17

 

·         Definition of the components of the huge U.S. market serving consumers outside of the traditional financial services market (the “unbanked”).  Alternative financial service companies evolved to serve these niches: Check Cashing Stores, Money Transfer Services, Pawnshops, Payday Advance lenders, Rent-to-Own Stores, and Subprime lenders.  Definition of each segment (number of outlets, and reasons for growth).

·         Review of Bureau of the Census, Federal Reserve Board, American Bankruptcy Institute, and Office of Immigration Statistics, information on the market’s segments.

·         Discussion of market size for Check Cashing Stores, Money Transfer Services, Pawnshops, and Payday Advance lenders.

Discussion & analysis of data/trends in each table below:

Table: Marketdata estimates of 2004 $ value of total market and main segments,

           Historical annual growth rate from 1999, 2008 forecast growth and $ values.

Table: U.S. Population Living Below the Poverty Level (1990-2003)

Table: Families Without a Transaction or Checking Account (1992-2001)

Table: Reasons Why Unbanked Families Do Not Have Checking Accounts (1992-2001)

Table: Consumer Credit Outstanding and Household Fixed Obligation Ratios (1992-2004)

Table: Debt Service Payments to Family Income (1992-2001)

Table: U.S. Noncommercial Bankruptcies (1991-2004)

Table: Annual U.S. Immigration (1992-2003)

 

                                                                     

The U.S. Check Cashing Industry   ($350)                                            18-41

 

Summary & Nature of the Business: How Check Cashing Companies Operate

·         Industry definition and size.  Who is the target market?  Check cashers offer convenience for a price.

·         Other services offered: money orders, wire transfers, electronic bill payments, notary signatures, utility bill payments, and lottery tickets

 

Industry History and Evolution

·         Beginnings in the Great Depression. 

·         Impact of deregulation of the U.S. banking industry.

 

 

 

 

 

                                                                                                                          PAGE

 

Customer Demographics (by gender, income, race, etc.)

·         Review of FISCA customer satisfaction survey. 

·         Ace Cash express customer profile. 

·         Dollar Financial customer profile.

 

Emerging Industry Trends

·         Michael S. Barr “Banking the Poor” - major findings

·         The entry of Wal-Mart into the check cashing market - discussion

·         Automated self service check cashing machines (SSMs) - discussion

 

Industry Regulation

·         Federal Regulations, state regulations

·         Definition of: The Bank Secrecy Act, Money Laundering Suppression Act, USA Patriot Act, Gramm-Leach-Bliley Act

Table: State Check Cashing Fee Caps

Table: State Banking Departments for States With Check Cashing Fee Maximums

 

Industry Size, Growth, Forecasts

·         Industry sales and number of units for 1999 through 2004

·         Industry sales and number of projected units for 2005 through 2008

Table: Number and Dollar Value of Payments by Check in the U.S. (2000, 2003)

 

Market Segments and Niches

·         Discussion of the different market segments

Table: Market Segments

 

Franchising

·         Review of the major check cashing franchise operators.

Table: Major Check Cashing Franchises (start-up costs, fees, royalty rates)

 

Check Cashing Industry Structure & Profit Margins

·         Review of the composite financial statements for check cashing outlets in New York State.

Table: Composite Common Size Income Statements of New York State Check Cashing

            Outlets  (1999-2003)

Table: Composition of Revenues of New York State Check Cashing Outlets (1999-2003)

Table: Check Transaction Activity (1999-2003)

Table: Composite Common Size Balance Sheets of New York State Check Cashing

            Outlets (1999-2003)

 

Major Competitors

Table: The Major Check Cashing chains (no. of outlets)

In-depth Profiles for… (Headquarters location, services, detailed 2002-2004 financials)

·         Ace Cash Express, Inc.

·         Dollar Financial Corporation

  

                                                                                                                         PAGE

 

The U.S. Money Transfer Services Industry  ($250)                        42-57                                                            

 

Nature of the Business

·         The transition from the money order to the electronic wire transfers.

·         How electronic transfers work.

·         Industry size.

·         Industry is being driven by the rise in global immigration.

Table: U.S. Immigration by Country of Origin (1999-2003)

 

Industry Trends

·         International money transfer market is very fragmented.

·         Major players have a small market share.

·         Increased price competition is lowering transmission costs to the consumer.

·         U.S. banks are developing services for the U.S. - Latin America transmission corridor.

Table: Global Wire Money Transfer Market Share, by type network

Table: The Cost to Send $200 to Latin America as a % of Amount (2000, 2004)

Table: U.S. Bank Money Transfer Products

 

Regulation of the Industry

·         Review of state regulations.

·         Review of federal regulations.

 

Industry Size, Growth, Forecasts

·         Industry revenues for 1999 through 2004 - discussion & analysis

·         Industry revenue projections for 2005 through 2008

Table: Number of Western Union and Moneygram Agents Worldwide (1999-2004)

 

Major Competitors

In-Depth Profiles for… (Headquarters location services, detailed 2002-2004 financials).

·         Moneygram International

·         First Data Corporation

·         Vigo Remittance Corporation

 

The U.S. Pawnshop Industry     ($295)                                                    58-72

 

Nature of the Business

·         Earliest form of consumer lending.

·         Highly fragmented industry that is concentrated in the southeast and southwestern portions of the U.S.

·         The pawn loan process - discussion.

 

Emerging Industry Trends

·         Pawnshops are entering the payday loan market.

 

 

Pawnshop Customer Demographics (by age, race, gender, income, etc.)        PAGE

·         Review of the Georgetown study - major findings

 

Regulation of the Industry

·         Review of state regulations.

·         Review of federal regulations.

Table: State Regulations on Pawnshop Interest Rates and Fees

Table: State Pawnbroker Associations - contact and phone.

 

Industry Size, Growth, Forecasts

·         Industry sales and number of units for 1999 through 2004 - discussion

·         Industry sales and number of projected units for 2005 through 2008 - analysis

Table: International Gold Prices (1999-2004)

 

Major Competitors

In-Depth Profiles for… (Headquarters location, services, detailed 2002-2004 financials).

·         Cash America International, Inc.

·         Cash America International, Inc

·         EZCORP, Inc.

·         First Cash Financial Services

 

The Payday Advance Industry   ($350)                                                   73-96

 

Nature of The Business

·         Fastest growing segment of the alternative financial services industry

·         The standard and bank business models - discussion

·         CFSA industry Best Practices. Guidelines.

Table: Comparison of Standard Payday and Bank Payday Loan Models

 

Emerging Industry Trends

·         Check cashing services and pawnshops are entering the payday loan market - analysis

 

End-User Demographics - Who is the Payday Advance Customer?

(by age, income, amount of loan, gender, reasons for loan, etc.)

·         Review of the Georgetown Study - major findings

·         Review of the IO Data study - major findings

·         Advance America’s customer demographics.

 

Regulation of the Industry

·         Review of federal regulation

·         Review of payday loan terms and interest rates

Table: Comparison of Payday Loan Terms and Interest Rates by State

 

  

Industry Size, Growth, Forecasts                                                                    PAGE

 

·         Industry sales and number of units for 1999 through 2004 - analysis

·         Industry sales and number of projected units for 2005 through 2008

Table: Payday Loan Outlets by State - number.

 

Payday Loan Industry Financials & Profit Margins

·         Review of the Flannery and Samolyk study - major findings.

·         Discussion of composite industry financials.

Table: Payday Loan Outlet Composite Income Statement for a Typical Unit.

Table: Payday Lender Loan Portfolio Characteristics

Table: Customer Loan Activity (no. of customers, loans, other metrics)

 

Major Competitors

In-Depth Profiles for… (Headquarters location, services, detailed 2002-2004 financials).

·         Advance America Cash Advance Centers, Inc.

·         World Acceptance Corporation

·         QC Holdings, Inc.

 

Reference Directory of Trade Associations & Sources

 

·         Address, phone, contacts for major trade groups, consultants, list of industry studies and articles, Wall Street analysts/research reports.