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Bank Technology News 08/02/2011
Payments: Automation is Washing Money Orders Away
Prepaid cards are the new vehicle of choice among the unbanked who have long endured high money order fees. Payments firms better take note.
By John Adams
The rise of automated payments has heavily influenced the strategy of banks and the behavior of consumers, and there's now evidence the fallout is reaching into the unbanked market as well. For companies that play in the money order game, there's a need to get hip to the new card and electronic channels-and pronto.
Aite Group research director Gwenn Bezard says the growth of prepaid debit cards, electronic payments, the Internet and self-serve will combine to erode the age-old marketplace for money orders and the check cashing establishments that have long served the unbanked and underbanked. "The rapid development of electronic bill payment services through walk-in locations, the phone and the Web has cannibalized the use of money orders for bill payment," he says.
Many unbanked people have used money orders as de facto savings accounts, taking them to check cashing establishments when they needed cash or to make a payment. The rise of more versatile prepaid cards could serve the same purpose. "Unbanked and underbanked are embracing prepaid cards attached to savings accounts, which directly reduce the need for storing money orders in a shoe box at home for short-term savings purposes," Bezard says.
Aite says the percentage of walk-in bill payment, or basic utility or monthly payments made at an on-site location by cash, checks or money orders (for the unbanked) is declining. These payments made up nearly 70 percent of the total walk-in market in 2004, 64 percent in 2005 and 62 percent in 2006.
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| Scam Resembles Others In The Region |
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| By David Reynolds |
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HARRISONBURG — Nadeem Afridi, who works at Food Mart on Va. 42, says he’s not cashing anymore checks for strangers. That’s because on Friday, he says the store his brother owns was taken for thousands by a check-cashing scam similar to one that’s hit other area convenient stores in the past year. He and his brother Waseem say they cashed $5,574.60 in counterfeit checks, which appeared to be payroll checks from Cargill — a company nearby. They caught their mistake the same day, when their brother-in-law notified them to beware. That relative, Tanveer Ahmed, also cashed a counterfeit Cargill check Friday at First Choice Deli, a convenient store on North Main Street, according to the Afridis and police. Ahmed became suspicious, then grabbed the woman who passed the check and held her until police arrived. Lt. Kurt Boshart, spokesman for the Harrisonburg Police Department said officers arrested Yolanda Santoyo-Lopez and charged her with two counts of forgery and uttering, a felony, in connection with the incident at First Choice. She faces an additional misdemeanor charge of providing a fake ID to police, Boshart said. On Tuesday, Boshart could not confirm whether Santoyo-Lopez’ arrest was connected to the incident at Food Mart. Police are still investigating the First Choice case, he said. And the Afridis say they have spoken with an HPD investigator regarding their case. Check The Checks The scam that the Afridis say they fell victim to — involving counterfeit payroll checks — is similar to ones that hit storeowners in Broadway and Stanley earlier this year. In March, DR’s Quick Stop, in Stanley, cashed almost $30,000 in bad checks, counterfeited to look like payroll checks from a large, nearby company, said storeowner Gary Breeden. In July, Mac’s Superette in Fulks Run cashed $944 worth of checks that appeared to be from Pilgrims Pride, said storeowner Bob Mullin. At that time, the owner of Broadway Supermarket said his store also cashed one bad payroll check. Also in March, four men who authorities say ran a ring counterfeiting and passing payroll checks, pleaded guilty in U.S. District Court in Roanoke. That scam, which passed $45,000 in bad payroll checks at Rockingham Heritage Bank, recruited illegal aliens in Los Angeles to pass fake checks in Virginia, according to attorneys in the case. The attorney said police had broken up that ring, but others may be copying it. On Tuesday, Boshart said the Harrisonburg police officers have seen this type of scam before. Investigators will meet with other area law enforcement to compare notes on cases that appear similar, he said. Storeowners can protect themselves, he said, by leaving check cashing to banks or only cashing checks for people they know and trust. Checks Reveal Minor Differences The Afridi brothers say that on Fridays, after a payday, several dozen people who look like poultry plant workers patron their Food Mart on Va. 42. They cash pay checks, wire money, to relatives in other states and countries, and usually buy food and drinks. The brothers, former Cargill employees themselves, say many are regulars that they know. So when bad checks appeared Friday they were caught off guard, until Ahmed called to warn them. A close review of the checks revealed an identical serial number on each check and no variation in the little vertical dashes that make up the bar code, Waseem Afridi said. And each check, a dozen in all, is made out to a different person. The Afridis say different people passed the checks, and that each had fake Cargill ID’s that matched the name on the checks. A spokesman for Cargill said the company is assisting police with the investigation. Now, out thousands, Waseem Afridi says he hopes it isn’t too late to catch those involved. "I want [the police] to take this serious," he said. "It takes a long time to make $6,000." Contact David Reynolds at 574-6278 or reynolds@dnronline.com |
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