Jennifer Tescher’s column in the American Banker today (sorry, you need a subscription to read it…) reminded me, a) how pleased I am to be associated with her and CFSI, and b) of a theory that I’ve had for a while: that Ace Cash Express is starting to look more like a payroll company, like ADP, than a check casher.

Jennifer wrote (making another point altogether), “NetSpend’s [IPO] filings show that direct deposit use is the big driver of usage patterns. Cardholders who use direct deposit to load funds are more active users overall and tend to remain active for longer. They initiate an average of 18 debit transactions or cash withdrawals per month versus four such transactions by cash loaders. They load three times more money on their cards, and they use them for three times longer.”  NetSpend reports around 500,000, or 29%, of their active users use direct deposit and that these users are approximately 6x more profitable than their cash loading friends.

In order to give Ace an incentive to promote a GPR, I imagine NetSpend must give Ace commissions if an Ace-originated customer turns on direct deposit (in favor of cashing her checks at an Ace store).  In 2009 NetSpend paid Ace $20m in commissions.  I would guess that Ace customers convert to direct deposit at a lower rate than NetSpend’s online-acquired customers.  But if even 10-20% of Ace’s NetSpend customers are converting to direct deposit, this marks an important and unexpected trend, and one that is not just great for customers, but has to be very profitable to Ace.

That trend is one where the oft-maligned check cashers, like Ace, are starting to serve the exact same functions as we would like the underbanked to get, and typically expect them to do so at banks.  So watch out ADP, Ceridian, and PayChex – while you fight for market share in a saturated market, the “alternative” guys are making hay in a wide open green pasture of 60m+ people.