Last week, unnoticed to most of the world, something noteworthy happened: a hybrid credit union and check-casher opened in East San Jose, CA.  This is not without precedent (CheckSpring Bank opened a bank-like check cashing branch in the Bronx, Kinetka Federal Credit Union bought the Nix Check Cashing chain in LA, KeyBank has put check cashing capabilities in 100’s of its branches and our friends at mPower opened a Mango Branch in Austin, TX), but still important.

It doesn’t look like much.  It’s on a busy street right in between a 7-Eleven (one with a v-com unit, no less) and a convenience store check casher.  It was started by the pioneering North Carolina based Self-Help Credit Union, who, with a grant from CFSI, endeavored to establish a model for a true hybrid.  The result: Micro Sucursal.

Here’s why I think the micro-branch is important:  consumer perception, lower-cost transactions, longer-term products, scalable model.   First, consumer perception.   The underbanked prefer check-cashers for a variety of reasons: convenient locations, better product fit, and a familiar, comfortable environment.  Other similar efforts still feel like bank branches.  Too big, too polished, not approachable, not retail-like.  This is a small branch (perhaps even too small).  It’s messaging is straightforward and transaction oriented (it actually should be better than it already is).  Likely, hopefully, someone looking to cash a check will walk in.

Second, lower cost transactions.  With a smart use of technology the Self-Help folks are able to cash more types of checks for less.  Their loss rates will be less.  Their fixed overhead costs will be less.  Most checks are cashed for 1% of the face value (which is good).  The branch offers competitively priced money orders, remittances and phone cards.

Third, longer-term products.  Bringing down costs on traditional AFS products is good and well, but doesn’t do much to improve the station in the life of an underbanked person.  True, long-term consumer value lies in longer term products: savings, loans, lines of credit, building credit, etc.   This check casher is actually a credit union.  By cashing a check you become a member.  Members have access to… guess what?  Very cool.

Finally, the fourth reason I think this little branch is important is because it is scalable.  Rent is cheaper than building a branch.  The technology hardware is limited and lots of it lives in the cloud (aka online).  KYC is in the cloud. Fraud is in the cloud. Risk decisioning is in the cloud. Transaction history is in the cloud.  I’d love to see more banks and credit unions buy up check cashers and reap the transaction income while providing access to these longer-term products.  We are very pleased and proud to have a small part in this particular prototype.  If you’re in the neighborhood, go check it out.