Growing up in the late 60s and early 70s, I went to the bank with my father as part of his Saturday errand ritual. Our bank, Pulawski Savings and Loan, was an unremarkable rectangle of a building located downtown in South River, New Jersey, the town where my Polish grandparents settled in the 1930s and 1940s. Our neighbor, Mr. Konopacki, was Pulawski’s president.
My parents opened my first savings account for me when I was 7. I was given a green Pulawski passbook I brought to the bank to deposit a birthday check from my grandparents or extra allowance money. Going to the bank was something the grown-ups I knew did.
Times have changed. For my children a bank is the nearest ATM. I do most of my banking online, and on the rare occasion I go to the bank for a cashier’s check or a money order, I don’t recognize a soul at the branch, and they don’t know me.
The depersonalization of banking is widespread. But there are an increasing number of Americans who frequent alternative financial service providers where the personal relationships between the teller and the customer still matter tremendously.
The alternative financial services industry—check cashers, payday lenders and the like—is growing rapidly, largely among low- and moderate-income people. Industry studies estimate that there were more than $58.3 billion in check-cashing transactions in 2010, up from $45 billion in 1990. Payday lending has grown from $10 billion in 2001 to nearly $30 billion in 2010.
As part of my research as an urban policy professor at The New School, I recently spent four months working weekly, eight-hour shifts as a teller at RiteCheck, a check cashing business in the Mott Haven neighborhood of the South Bronx. I wanted to understand how and why the people who frequent these "alternative" financial institutions use them. Like the majority of my academic colleagues, I believed check cashers, with their per transaction fee structure, and payday lenders, preyed upon the unbanked. But I learned quickly that many RiteCheck customers have made a conscious choice to be unbanked.
Policy makers, consumer advocates and academicians, are troubled by the numbers: 17 million nationwide are unbanked, and 43 million have a bank account but also continue to use alternative financial services providers.
In poor areas like the South Bronx, the statistics are starker still. The South Bronx has only one bank per 20,000 residents. In Manhattan, one bank serves every 3,000 residents. More than half of the residents of Bronx Community Board 1, which includes Mott Haven, have no bank account. Almost three-quarters of Bronx residents have no discretionary income, which often provides the impetus for establishing savings and other commercial bank accounts.
When I arrived at RiteCheck in mid-November, I spent weeks training at the elbow of Cristina, a veteran teller from the Dominican Republic who has worked at RiteCheck for more than ten years. Like the more experienced waitresses I worked with at a greasy spoon during college summers, Cristina often knew what her customers needed before they reached her window. Indeed, the relationships I encountered between tellers and customers at RiteCheck were much more like those I had witnessed as a child at Pulawski Savings and Loan than what I currently experience at the multinational brand name bank I use.
Jorge, a grizzled, wheelchair-bound Puerto Rican came in every morning, greeting the tellers by name and steering himself to Cristina’s station. He bestowed a wide, toothless smile on her as she checked the previous day’s winning Lotto numbers and slipped the printout under the bulletproof glass window without his having asked for it. Jorge gave Cristina a slip of paper with the numbers he wanted to play that day scrawled in pencil, and she entered them quickly into the Lotto machine. "Suerte!" she called after him as he wheeled his way out the door.
Our busiest days were at the beginning and the end of the month, when customers came for their government benefits checks. Scores of customers paid RiteCheck $2.50 a month to get their monthly Supplemental Security Income checks sent directly to the store because their checks arrived at RiteCheck electronically a day or two before they would have arrived at their homes by mail, and these customers needed their cash as soon as they could get it. We never knew exactly when the checks would arrive, and the phones rang incessantly in the day or two prior. Some callers didn’t even bother to say hello when they called, but rather greeted us with: "Are they there yet?"
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At commercial banks, the account itself often maintains the relationship between the customer and the institution. I might not be satisfied with my bank, but it’s an enormous inconvenience to switch everything over to a new one, and there is no guarantee any other bank will be more efficient or better.
The glue at RiteCheck is the customer/teller relationship. I interviewed 50 RiteCheck customers after my stint as a teller and, when I asked them why they brought their business to RiteCheck instead of the major well-known bank three blocks away, they often told me stories about the things the RiteCheck tellers did for them. Nina, who has lived most of her life in Mott Haven, told us that her mother had been very ill and that the RiteCheck staff had called to ask about her. "So we can be family," Nina said. "We know all of them."
Being a regular at the check casher also brings more tangible benefits. Marta, another regular, came to my window one afternoon with a government issued disability check to cash. When I input the number from her RiteCheck keytag into my computer, the screen indicated she owed RiteCheck $20 from every check she cashed. I didn’t know what to do, so I turned to Cristina for advice. I learned that Marta had cashed a bad check awhile back, and that RiteCheck had worked out an arrangement in which she could pay RiteCheck back in installments.
"Pero no tengo los veinte pesos hoy," Marta explained. Marta could not pay the $20 today—she needed her entire check to cover an unexpected expense.
"No te preocupes, mami—la próxima vez." Cristina knew Marta would be good for her debt, and that accommodating her situation was good for business.
At RiteCheck, the tellers treated the customers as individuals and went the extra mile to assist them, perhaps in the same way that a neighborhood grocer might allow a trusted customer to run a monthly tab. On busy days, tellers regularly skipped lunch and coffee breaks in order to keep the wait times down. Ana Paula, our manager, often joined us at the window. The customer always came first and knew it.
RiteCheck’s regular customers clearly valued the people who provided them with this service, too. It was not unusual for a customer to bring us coffee in the morning. They often tipped us; for tellers who had been working at the store for a long time, those tips could add up to an extra $40 or $50 a day. When Cristina, who was very pregnant when I started, had her baby, customers asked after her and dropped off gifts. As a newcomer, I received less of this kind of attention. Light-haired and taller than most of the Latinos who populated the neighborhood, I stuck out. But when one of the regulars asked the other teller if I was okay on a day I had called in sick with the flu, I knew I had been accepted as part of the RiteCheck family.
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Policy makers are intent on moving the unbanked and underbanked to traditional commercial banks. On some levels, this strategy makes sense. Check cashers offer no way to save, and the ability to accumulate assets is widely recognized as an important step in the process of exiting poverty.
The primary critique of check cashers is that they are expensive. Sitting in my New School office eight miles south of Mott Haven, I had believed that, too. When I interviewed my customers, however, I learned that for many lower income people, commercial banks are ultimately more expensive. The rapidly increasing cost of bounced checked fees and late payment penalties has driven many customers away from banks, particularly those who live close to the edge, like many of my RiteCheck customers. A single overdraft can result in cascading bad checks and hundreds of dollars in charges.
Many factors—cost, transparency, convenience—go into the choice consumers make between a bank and a check casher. Atmosphere and the attitudes of the staff are only one component, but this piece of the puzzle may be more important than we thought. Like the famous TV song goes, "You want to go where everyone knows your name." If policy efforts to move the unbanked to banks are to be successful in the long run, banks need to remember they are a service industry involved in one of society’s most important and basic relationships.
The banking industry needs to develop different fee and service structures designed to accommodate lower income depositors in much the same way banks currently provide VIP treatment to high-net-worth individuals. A good start would be to limit overdraft fees, and to rethink the use of private databases like ChexSystems that currently keep more than a million low income Americans from being able to open accounts. Tellers need to remember that every customer is more than the number of digits in his account balance and deserves service and respect.