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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 "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 community backing.

"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 affordable discount."

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.

RBC 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.


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