For Captain Ahab it was Moby Dick. For Wes Dunn it was check-cashing ATMs.
"Check-cashing was kind of my 'white whale,'" said Dunn, who is vice president of sales at Genmega. "I've always talked about how I've been chasing this white whale for quite some time, and I never thought anybody would ever catch it."
But somebody finally did. And in contrast to Ahab's case, the whale came to Wes Dunn. Also, happily, he lived to tell the world about the one that didn't get away — a Genmega/Nexxo Financial Services partnership that has put affordable, reliable check-cashing ATM/kiosks on the streets. And at the recent ATMIA conference in San Antonio, the world (or at least the ATM industry slice of it) seemed eager to hear more. "It was shocking how many people came back asking for Nexxo's contact information," Dunn said.
A history of misses
It's not that check-cashing is all that brand-spanking new. Check cashing ATMs have been around for some years, but not without a steady string of misfires. For instance, in a partnership with Wells Fargo more then a decade ago, a company called InnoVentry installed check cashing machines in Kroger stores. But there were problems — including a four- to five-foot long check path, said Dunn.
"I was talking to the gentleman who was in charge of that program … The check would go in the device … and inevitably if the check was rejected, it had to go back through that four-to-five feet path and it would get caught up," Dunn said. "And [Wells Fargo] was like, 'You gotta be kidding me.'" Both the program and InnoVentry went bust.
Dunn had his own close-up-and-personal experience with check cashing machines working for a company called Financial Payments. The company retrofitted older Tranax machines for check cashing, put 50 on the street and lost $50,000 to check fraud within a month.
"The problem with check cashing has always been that the decision engine is either going to be too loose and you get hit with fraud or it's too strict and you turn everybody away and consumers are like, 'Why do I even bother with that machine, because its not cashing my check?'" Dunn said.
More than a dream
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So what made Genmega not just willing, but eager to work with Nexxo to develop and build check-cashing ATMs? "They've been able to put machines on the street that are actually working and prove to the market that this is not 'paperware,' and that's huge," Dunn said. "It's not somebody in their dreams. It's physical machines that are doing transactions, and that are working today."
Also important to Dunn was that Nexxo showed they could add cost-efficiency to effectiveness. Using check cashing technology from Chexar, Nexxo was able to substantially ratchet down the price of the machines in the market compared to others that were also effective — at up to four times the cost.
That was "the long pole in the tent," Dunn said. "You have check imagers that are no longer $2,000 or $3,000, but they're a lot less expensive. You have bill acceptors that have gone down in price … And they're more reliable. Really at the component level, that's where the engineering changes have really taken place to make this viable."
Not only viable but — when coupled with other ATM and kiosk functions — also immensely more useful (and profitable) than previous machines, said David Alvarez, CEO and co-founder of Nexxo Financial Services. And he should know. Nexxo currently is operating more than 300 of the machines and has pilots going with a number of major retailers and financial service providers.
A machine with a memory
"Our kiosks today do money transfers, they do check cashing, they do money remittance, they print money orders, they do phone card top-ups, they do prepaid card servicing allowing you to deposit a check on your prepaid card, or to deposit cash or withdraw cash," Alvarez said. "And so we've created the technology that allows for a very fast, simple, easy user experience for meeting most of the banking needs for the consumers that are using those types of products."
One of the key features of the machines, said Alvarez, was their ability to "remember" the user. Each function a customer used was stored in that users account and instantly drawn back up with the next visit to the machine.
"Once you set up a bill once with us, it's always there for you to come back to," Alvarez said. "[I]f you were to go to, for example, a Walmart Money Center or some of the other check cashers that offer these services, their customers are often left in the position of filling out a form every single time they come to send money. Or bringing in their bill each time and somebody re-keys in that information each time."
This introduces both the prospect for entry error and wait time, Alvarez pointed out, whereas repeat transactions at the Nexxo/Genmega ATM/kiosk leave virtually zero room for error after an initial transaction has been completed successfully, and require an average transaction time of less than 30 seconds.
Alvarez explained that with each check cashed the Chexar system "gets to know you better" over time, creating what might be described as an algorithm of trust, that makes the check-cashing process faster and more trouble-free. All on one machine that unites services that many in the un- and underbanked worlds are used to having to manage at multiple locations. That's good for the consumer and for the provider Alvarez said.
Loyalty and profitability, hand-in-hand
"Our software unifies all of [the transactions] into a centralized customer database that allows the provider, whether that be a retailer or a bank, to actually have all that data as to who their customers are and what kind of transactions they're doing," Alvarez said. The benefit to providers is cross-product, cross-channel promotions and pricing.
"You can say, 'If you just cashed a check with me, I'll give you a discount on your billpay,'" Alvarez said. "We can do that, and so we built some very powerful pricing and promotion engines into the software that allows you to use pricing as a tool to manage your business."
And the business, he said, can be good. Alvarez said that he's seen studies showing that roughly 100 million American households are good candidates for the services of the Nexxo/Genmega machine. "About 100 million households doing $77 a month … of these fee-based services."
His view of the world (more specifically, the U.S.) is that households break out along a "one-third/one-third/one-third rule," with the top third — the wealthiest — served exclusively through banking services.
The second third — upper- to lower-middleclass families — includes those who use bank accounts either primarily or partly for their financial needs. Alvarez said about half of these households would be likely to use the Nexxo/Genmega solution; in the last month about half of Nexxo's 100,000+ money transfers originated with senders who had a bank account. "It's not like these are people who are excluded from the system," he said. "But they're people who have chosen primarily to operate in a cash economy."
The bottom third of households are mostly unbanked, Alvarez said, and would likely depend on a multifunction ATM for most or all of their financial services.
Whoever the user, Alvarez concluded, the opportunities for fee income are real and substantial. And the ATM that Nexxo and Genmega have developed allows them to provide a customer-centric experience that users will come back to again and again. This, he said, is ultimately the key to profitability. "This is a very interesting evolution taking place that will allow you to ultimately meet the customer where the customer wants to be met."
For more on this topic, visit our multifunction ATMs research center.