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SAN FRANCISCO -- San Francisco Bay Area customers can buy a Slurpee, cash their paycheck and settle their home residential telephone bill all in one stop now that 7-Eleven Inc. has added Vcom financial services to its lineup.
Dallas-based 7-Eleven has begun cashing personal and payroll checks, selling money orders, and conducting money transfers at 27 Bay Area stores as part of a national effort to attract business from people without bank accounts. That growing population is getting increased attention from non-banking companies, according to the San Jose Mercury News.
Since rolling out its service late last year, 7-Eleven has equipped about 1,000 stores in over a dozen states with specially designed Vcom (short for Virtual Commerce) kiosks offering financial services. The devices, already added to hundreds of stores this year, are being scheduled to be added to more than 2,500 more 7-Eleven stores next year, with the company spending $240 million on the project.
"During focus groups we conducted last year, customers told us they wanted to cash their paychecks and pay their bills at the same time," said Jay Giesen, 7-Eleven's vice president and general manager of Vcom. "7-Eleven created Vcom to provide consumers around-the-clock access to products and services not traditionally found in convenient locations," he said.
At the center of the company's new effort is the estimated 9 percent of American households that do not have a traditional savings or checking account at a bank or credit union. Banks have ignored that low-income sector, so 7-Eleven is moving in, said Todd Miller, business development manager for the Vcom division.
Bank branches remain scarce in many working-class communities, according to industry experts, with the ranks of the "unbanked" growing along with the U.S. immigrant population. While individual households may be low-income, together the group's combined spending power is formidable. And that's led to the rise of businesses seeking to fill the void by selling money orders, wiring funds, cashing checks, and giving paycheck-backed cash advances, which are also called "payday" loans.
Check-cashing businesses process more than 180 million checks worth $55 billion annually, and 80 percent of those are payroll checks, according to the trade group for check-cashing stores, Financial Service Centers of America, the report said. As do others in the industry, 7-Eleven will make money by charging check-cashing fees. Vcom cashes personal checks, a service normally conducted by banks and some check-cashing stores. Vcom takes 10 cents of every dollar on personal checks and requires customers to register for the service.
Across the industry, fees of 5 percent to 25 percent are common to cash personal checks, said Morris Reid, managing director at the Washington, D.C.-based financial services consulting firm Westin Rinehart. The sometimes steep fees reflect the higher risk of fraud in cashing a personal check, said Miller. A random survey of four San Jose check-cashing firms found none cashed personal checks. To cash payroll checks, the companies charged $1.99 to $3 for each $100 of the check's value. For every $100 of value, 7-Eleven charges $3 to cash government-issued checks and $2.50 to cash employee payroll checks.
Under California law, check-cashing fees are capped at 3 percent on payroll and government-issued checks if the customer presents identification. If the customer has no ID, the cap is 3.5 percent or $3, whichever is greater, according to Rick Lyke, spokesman for Financial Service Centers of America. There is no cap on fees charged for personal checks, he said, but the stores don't have to accept them, the report said.