First Union Patents a Check-Cashing Card
for Non-Account Holders

Banks incur fraud risk when cashing payroll checks for consumers who aren't customers. First Union recently received a patent on a new card that cuts the fraud risk and lets non-account-holders cash checks quickly, without a fee. The product was invented by a First Union senior vice president, William T. Morrison.

Consumer identification is the major obstacle to cashing checks from non-customers. Mr. Morrison told the American Banker that the idea for the check-cashing ID card grew out of the experience First Union had in the early 1990s cashing payroll checks for non-customers using a driver license for identification. Driver licenses were easy to counterfeit. In 1996, the Florida Bankers Association launched a thumbprint identification program for non-customers who wanted to cash payroll checks. The program cut fraud dramatically, but had an equally dramatic effect in slowing the teller lines. In addition, consumers resented the thumbprinting process.

Under Morrison's card system, non-account holders can apply for identification cards giving their name, address, Social Security number and place of employment. Once approved for the card they need only key in a four-digit PIN number at a special terminal at the teller window in order to cash their payroll check. First Union launched the system in Miami three years ago and has issued 300,000 check-cashing cards, with enrollments of 3,000 to 4,000 per week. An average of 80,000 cards are swiped each week. The company will roll out the product shortly in New Jersey, followed by other states. Customers pay a $1, one-time fee for thumbprinting (the first time they use the card to cash a payroll check). After that, check-cashing transactions are free.

First Union is in the process of marketing the card to other banks to allow them to compete more effectively with check-cashing centers. A check-cashing outlet typically charges a fee of 2% to 2.25% of the check's face value. The executive director of the Financial Service Centers of America (Hackensack, NJ), the trade association that represents two-thirds of the storefront check-cashing industry, told the American Banker that First Union's product could take some business away but the effect would not be dramatic. Check-cashing is only one of several services provided by storefront check cashing centers. The First Union product will not give cardholders a one-stop shop for money orders, utility bill payments, traffic fine payments, auto registration payments, and other services.