January 10, 2003
Low-Income Toronto Residents Save on Check Cashing
by William Baue
Royal Bank of Canada tailored its Cash & Save concept to meet the unique financial services needs
of residents in a diverse, densely populated urban community.
On October 15, 2002, Royal Bank of Canada (ticker: RY)
opened its innovative Cash & Save store in the Parkdale area of Toronto, Ontario. The store offers
residents a lower-cost alternative for basic financial-transaction services. The Cash & Save
store, which is still in a "test and learn" period, allows customers to cash checks, pay bills,
purchase money orders, and wire money at much more reasonable rates than private check cashing
stores. Cash & Save thus fills a niche in the marketplace while simultaneously serving the needs
of those on tight budgets.
The pre-history of the program dates back to 1997, when
Royal Bank of Canada (RBC) closed its full service Parkdale branch after a review of its branch
network that resulted in restructuring throughout Canada. The next year, RBC placed a community
banker into the Parkdale region to help community members with their banking and financial needs.
RBC’s community banker worked directly with a social services organization, St. Christopher
House, a United Way agency that has provided support to the Parkdale community for over 90 years.
The idea for Cash & Save was born out of this unique partnership.
"Bain & Company, a global management consulting
firm, approached St. Chris to offer pro bono research," RBC Vice President of Customer Management
Andrea Nixon told SocialFunds.com. "This research confirmed that in this community many people
spend a large portion of their limited monthly income on the basic financial services they require:
check cashing, bill paying, money orders and wire transfers. So a full service branch offering is
not what the community needed. We looked at what they did need, and out of that came Cash & Save."
Because RBC worked directly with the community, the Cash & Save concept has benefited from
"I supported it right from the beginning; it was more like a community
effort," said Michael Robertson, a member of the Parkdale Economic Resource Committee (PERC). PERC
helped identify the community's financial services needs that are now being filled by Cash & Save.
Mr. Robertson also works part-time for a PERC organization. "I use Cash & Save for paying my bills
and cashing my weekly PERC check. I find it very convenient to go there and get fast cash at an
Private check-cashing companies typically charge 2.99 percent plus a
set $3 (Canadian) fee for check cashing.
"We're a lower-cost provider, and in some
cases, we're not charging at all for our services," said Ms. Nixon.
Cash & Save charges
1.25 percent for check cashing, with no additional fee. And it does not charge anything for
cashing federal government checks. Cash & Save's bill-payment fee of $1.25 compares favorably to
the $1.99 fee charged by most check-cashing companies, although both outlets charge $1.99 for money
orders. These rates seem to satisfy community members, as does the range of services.
is able to offer such low rates partly because the Cash & Save outlet is inexpensive to operate.
RBC purposefully runs the Cash & Save out of a small venue and keeps the number of staff small in
order to reduce overhead.
"This is a test-and-learn store, so we've got all kinds of
measurements we're tracking," said Ms. Nixon. "Our working hypothesis is that the Cash & Save
business model is portable to other communities and geographies. We're in the process of scoping
out a location for a second store to confirm that it is."
Although the financial viability
of Cash & Save is paramount to RBC as well as to the community, which wants to see it stay in the
neighborhood, Ms. Nixon commented that financial returns are not the only yardstick of success.
"Besides the pure business aspects, there's a social responsibility," Ms. Nixon said.