News

Tax season provides nice return for ATM deployer

For those who want their tax refunds sooner rather than later, BVIG Financial is trying to get the money in their hands as soon as possible -- via ATMs located at tax preparation offices. BVIG's partners include CashWorks and Tidel.

April 14, 2003

For those who want their tax refunds sooner rather than later, a company called BVIG Financialis trying to get the money in their hands as soon as possible -- via Tidel is2000 ATMs outfitted with CashWorks software.

Houston-based BVIG expects to cash nearly $40 million in tax refund checks at 59 tax preparation offices -- 31 Jackson Hewitt locations and 28 independents -- by the end of tax season.

Todd Binet, BVIG's president and chief executive, previously worked with TRE Financial Services, a provider of software and services to independent tax preparation firms, as an investment banker.

While working with TRE, Binet became interested in offering check cashing at ATMs located in tax preparation offices. He had a longstanding relationship with the management team at Tidel, which introduced him to CashWorks, a Dallas-based financial services company founded by several former principals of InnoVentry.

The first ATM manufacturer to agree to adapt its software to support check cashing in early 2002, Tidel later invested some $500,000 in CashWorks. In late 2002, Triton made CashWorks part of its Waves program, which offers advanced ATM applications through a package of bundled software. (See related story CashWorks catches Triton's Waves)

The CashWorks program utilizes a proprietary point-of-sale terminal called a PayPort to authorize transactions. Unlike totally automated check-cashing programs, a clerk confirms the check holder's identity and enters the relevant information using the PayPort's keypad. He then directs the check holder to an ATM, where the funds are dispensed.

BVIG has signed a multi-year, exclusive agreement with CashWorks to use its PayPort technology at tax preparation sites. BVIG also signed a distributor agreement with Tidel.

Just can't wait

Ken Rees, the chief executive of CashWorks, said his product is especially well suited to the thriving tax refund anticipation loan business. With this type of loan, a taxpayer can get his refund right away rather than waiting several months for the government to process and mail it. The tax preparer essentially offers next-day service by arranging a short-term loan from a participating bank to the taxpayer -- for a fee.

According to a May 2002 reportby the Brookings Institution Center on Urban and Metropolitan Policy and the Progressive Policy Institute, tax preparers earned $357 million from these types of loans in 2001, more than double the approximately $138 million they earned on similar products in 1998.

The loans have grown despite coming under fire by consumer groups, who contend that the biggest market for the loans is the working poor, an audience they say can ill afford annual percentage rates (APRs) of 60 percent or more.

The convenience of an ATM that dispenses funds on-site is a big draw for those in a hurry, said Binet and Rees. Though BVIG charges 2 percent to 3 percent of a check's face value to cash it at the ATM, many of the customers opting for tax refund anticipation loans do not have bank accounts and would ultimately pay more to cash their checks at a traditional check-cashing outlet, they said.

"BVIG offers a tremendous service to our customers, especially those that are unbanked," said Bill San Giacomo, Jackson Hewitt's vice president of Bank Products. "Instead of having to go to a check-cashing store or bank in another part of town, our customers will be able to get their cash instantly."

CashWorks and BVIG are not the only companies to provide check cashing at ATMs in tax preparation offices. According to a news release, ACE Cash Express, the nation's largest check-cashing chain, planned to place check-cashing ATMs in 248 H&R Block offices during the 2003 tax season.

This is ACE's third year of providing the service. In 2001, it installed 50 Diebold ATMs at H&R Block offices. It added another 50 machines in 2002. According to the ACE release, the company cashed some 575,000 refund checks with a face value of more than $649 million in 2002 -- collecting $21.3 million in fees. The release doesn't say what percentage of those checks were cashed at ATMs.

In their sites

Rees said the Jackson Hewitt deal is the largest single deployment to date for CashWorks, which now provides check cashing at about 350 locations in more than a dozen states.

He believes it illustrates the potential for deployers using CashWorks to place machines in locations that couldn't support ATMs through surcharge revenues alone, such as discount retail stores or drug stores. This is especially important as the number of traditional outlets such as gas stations and convenience stores without machines continues to dwindle.

"We're offering a competitive advantage to distributors trying to compete in a shrinking market," Rees said.

The is2000s used at the tax preparation offices are equipped with Level 1 vaults for added security and three or sometimes four cash cassettes, said Binet. Armored carriers keep the machines stocked with $100s, $10s and $1s.

"We're going through a lot of cash in a short period, so when we sorted out the economics, it still made sense (to use armored carriers)," he said.

The ATMs will remain at the locations even after tax season is over, said Binet, who hopes that at least some of the tax preparers will be interested in cashing other types of government and payroll checks year-round.

Though Binet didn't have exact numbers, he said that "quite a few" Jackson Hewitt customers opted to cash their checks at the ATMs. More than 97 percent of those questioned after using the service said they would do so again, Binet said.

With results like that, he expects Jackson Hewitt will want to add on-site check cashing to more of its 4,000 locations next year. BVIG just inked an exclusive, multi-year agreement with the tax chain to provide the ATM-based service.