Check Cashing and Cards -
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Published on: 12/16/2005
Last Visited: 10/23/2006
"We were intrigued by the whole unbanked space, and intrigued is still the operative word," said Marc Sheinbaum, who oversees most of GE's efforts to court the unbanked as the president of GE Money Services in Stamford, Conn.
As with other financial services businesses, product differentiation is essential and difficult.But in the unbanked market, simply deciding which product to offer is also a challenge.
"The marketplace is just changing all the time," Mr. Sheinbaum said.
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Mr. Sheinbaum said CashWorks' prepaid card model is a natural fit with GE's extensive stable of retailers, built from years of offering private-label credit cards.GE was the top issuer of such cards last year, with 37% market share and $ 26 billion of receivables at yearend, according to the newsletter The Nilson Report.
"The card aspect is what we believe gives us a differentiation," Mr. Sheinbaum said.
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Mr. Sheinbaum said one thing GE likes about the check-cashing market is that it isn't very high-tech.That means his company can concentrate on products and marketing rather than technology.
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"CashWorks is not our overall unbanked strategy," Mr. Sheinbaum said."It was a way to get in, learn about the customer, understand their needs, and understand this marketplace."
"Our thinking was and continues to be that if you can establish an ongoing relationship with that customer -- even though it's not a credit or lending relationship -- there are other valuable services you can provide them that meet their needs," he said.
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Mr. Sheinbaum acknowledged this was an area GE has to continue to adjust to.
Several hundred of CashWorks' retailers are independent storefronts, "and that's not something we're used to dealing with," he said."So we need to get smarter and more comfortable dealing in that space."
Branding is another quandary for GE.Traditionally a business-to-business player in the consumer finance world, it has little brand awareness as a financial provider.
"Our legacy is, we work with our client to use their brand whenever possible," Mr. Sheinbaum said.Unbanked customers "don't know GE Money.They're comfortable with the retailer brand."
On the other hand, Mr. Sheinbaum realizes that GE is now working with providers whose brands lack the recognition of more traditional GE partners.He said that he would let his distribution network, the retailers, determine the branding.
"If we have retailers that say, 'We want your branding,' then we'll say, 'Here is the branding we're going to use,' " he said."It depends on the strength of that retailer."
GE has no plans to push its own brand in serving the unbanked, but it is a possibility.
"My goal is to create a service," Mr. Sheinbaum said.If capitalizing on the GE name is "how I get to my goal, then that's what I'll do.But that's not my main reason for being in business."
Just as it is prepared to follow its retail partners, GE intends to take cues from competitors, too.
"We tend not to be bleeding-edge," Mr. Sheinbaum said.
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CashWorks has been testing the card since July. (Mr. Sheinbaum would not name the card's distributor.)
The card bears the GE Money and CashWorks logos.Like the other CashWorks cards, it is connected to a deposit account at GE's federal savings bank, but it has an additional feature -- the customer can have their payroll check directly deposited into the account.Mr. Sheinbaum said about 10% of the customers in the pilot program are signing up for direct deposit.
"That's very encouraging, because now you have a steady stream of loading on to the card, which means the customer is going to use the card," he said."That's a home run."
Usage Gap
But some aren't even stepping up to the plate.Mr. Sheinbaum said there is a large gap between the number of people getting the signature card and the number of those who actually use it.
"We're dealing with unbanked customers who aren't used to getting debit cards, let alone credit cards," he said.
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Mr. Sheinbaum said that GE hasn't ruled out anything at this point, with the exception of payday lending."That doesn't feel to us like a space we want to play in," he said."There are other types of lending products that we can develop to give customers the chance to earn their way up to the kinds of products that mainstream customers have."
GE will continue to wait, watch, and learn.
"Nobody is going to crack all the codes," Mr. Sheinbaum said.
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