Member Profile | Zipcash Financial Trust
A recent study published by the Federal Deposit Insurance Corporation (FDIC) in 2009 revealed that 28.3% of the US population is considered to be ‘unbanked’ or ‘underbanked.’
The term unbanked refers to households that do not have a checking or savings account and rely on Alternative Financial Services (AFS) and the term underbanked refers to households that either have a checking or savings account, but have used an AFS Service in the last 12 months. AFS is a Multi-Billion dollar industry and is rapidly growing. Some of the services provided by an AFS include: Check Cashing, Payday Loans, Money Transfers, Pre-Paid Cards (Visa, debit etc.), Refund Application Loans, Buy Here-Pay Here Loans, Money Orders as well as Rent-To Own Loans.
As Canadians, these statistics might come as a big shock, as we are far more sophisticated when it comes to our banking habits. In Canada there are four to six National banks (depending on who you ask) and typically Canadians are used to paying bank fees, using chip card technology and getting paid via direct deposit from our employers to our bank account once every two weeks.
In the US the banking system is entirely different. With over a 1,000 banks, the US banking system is much more fragmented than in Canada. As a result, it is costly to implement integrated banking technologies. Also, due to the competitive nature of the US banking system, Americans have been conditioned into not paying banking fees as is evident from many quarterly reports of public banks. As a result, according to a report by the FDIC, many people in the US have turned to AFS to take care of their basic living expenses (i.e. rent, home and car repair, mortgage payments, special gifts, health care, etc); preferring this method of banking as often AFS are more convenient and money is available faster. As well, often Americans may not qualify for an average bank loan, do not have bank accounts, or if they did, the high fees cannot be managed.
The problems of the US banking system have always existed, but are only getting worse with the current state of the US economy. The stock market is getting better, but the unemployment problem is not. If one digs deeper into the US employment statistics published by the Department of Labor weekly and monthly in the United States (by looking at actual people looking for work now vs. before) it is clear that many people have just given up looking, which is not reflected in the unemployment rate the way it is portrayed by the Obama Administration.
The Automated Teller Machine (ATM) business in the US is a $27 Billion Industry and growing. It is estimated that there are over 30 Million Transactions performed each day with an average fee of $2.50 per transaction. Certain parts of the country (on a per capita basis) are lacking sufficient ATM’s; especially in the denser populations in the Central and Eastern States where there are a higher percentage of people who are unbanked and underbanked.
This is where Zipcash Financial Trust and Zipcash Partnerships come in to play. Zipcash was created to help the underbanked and unbanked achieve their financial goals without having to go into brick and mortar stores and pay high costs to do so.
Along with their partner, Paycenter1, Zipcash purchases Financial Kiosks and deploys them in areas of highly unbanked and under banked populations. The Kiosks are an ‘all in one’ solution that provide a number of financial services which include: Cash Withdrawal (ATM), Bill Payments, Money Transfers, Check Cashing, Pre Paid Phone Cards, Gift Cards, Pre Paid Credit/Debit Cards, Transit Passes, Vehicle Insurance, and more services can be added as a software upgrade on Paycenter’s proprietary technology. The Kiosks also accept Electronic Benefits Transfer (EBT) Cards; EBT cards being the method by which the US government pays people their welfare checks. The Kiosks have an additional feature that generates revenues via advertising, as each Kiosk has a 32 inch advertising monitor located on the top front of the machines.
Zipcash has taken the Canadian ATM Model to the USA, where contracts are signed with the retailers for five years, with a five year renewal option (Paycenter 1 option), and pay the owner a royalty. This was never the case before for a lot of these retailers as the retailer either had (i) their own machine, and with that the maintenance costs, the costs of filling the machines with cash, etc.; or (ii) a machine from a third party, but they received nothing for having these machines in their store. As well many of these store owners do not like having a significant amount of un-insured cash on hand in their stores.
By eliminating overhead costs like staff wages, bricks and mortar, security systems etc. the Kiosks are able to reduce transaction fees.
to the individuals using these services. The retailers (where the Kiosks are located) enjoy having them in their stores as they help to drive foot traffic, they look great, and the retailers receive royalties from the machine usage.
It is a commonly held belief that the AFS industry is an industry where egregious service fees are charged to individuals that in most cases are in a low to no income bracket. Some have suggested that being involved in the AFS industry is unethical in that a profit is being made by preying on these individuals. Zipcash believes that this commonly held opinion need not be the case. Zipcash has addressed this concern by substantially reducing costs on many of the transactions to encourage people to use our services as an inexpensive alternative to the numerous larger stores that still charge outrageous fees for their services.
Zipcash believes that people should not be taken advantage of because of their financial state. Zipcash is an efficient method of banking and as such Zipcash can make a profit and reduce costs to consumers; a good thing. Zipcash’s business model is based on providing this substantial demographic of the unbanked and underbanked with the ability to do their banking conveniently and without the high costs. Our belief is that our company should have strong values and ethics; thus providing our ever growing customer base reduced transactions rates compared to other AFS companies and their subsidiaries.
The Exempt Market in Canada currently has many products that focus on equity investments that pay out in the longer term. Zipcash was developed and created to pay investors a monthly return of both interest on their money (which stays consistent for the length of the term), as well as a set rate of principal return each and every month. The returns are generated by fees that the Kiosks return to the investors.