Public CompanyIncorporated: 1968 as MoneyMartEmployees: 1,731Sales: $122.3 million (1999)Stock Exchanges: NASDAQTicker Symbol: AACENAIC: 522294 Secondary Market Financing; 52229 All Other Nondepository Credit Intermediation
ACE Cash Express, Inc. is the largest owner, operator, and franchiser of check-cashing stores in the United States. In addition to its booming check-cashing business, ACE offers a range of other services, such as small consumer loans, money orders, wire transfers, and electronic tax and bill payment. ACE also sells pre-paid phone cards, auto insurance (in conjunction with Instant Auto Insurance), and pre-paid Internet service (with ePOWER International). The company has grown considerably in recent years, doubling the number of its stores to 960 spread among 29 states between 1994 and 1999. A publicly traded company since 1993, ACE has labored to overcome the popular preconception that the check-cashing business is a sordid industry exploiting the poor and disadvantaged.
Early History of Check-Cashing Industry
emerged as the industry ‘ s leader. The first such businesses sprang up in the 1920s when a number of companies began to pay their workers with checks instead of cash. Depression-era Americans were loathe to deposit their paychecks in the nation ‘ s failing banks, and instead opted to cash their checks in neighborhood outlets that charged a small fee for such services. After the Federal Deposit Insurance Corporation (FDIC) was created to place a safety net under individual bank depositors ‘ assets, the average worker came to rely less on check-cashing businesses.
Adapting to this trend, check-cashing stores began to carve out a niche serving those who could not – or would not – obtain bank accounts. Often located in inner-city areas, these stores charged a fee to cash government or payroll checks for their clients. The entire industry was, in large part, unregulated, with some businesses exacting as much as 20 percent of the check ‘ s face value as a “ service fee. ” Check-cashing stores typically conducted other transactions as well, including the sale of money orders, lottery tickets, and public transportation tokens.
ACE ‘ s Origins: 1968-85
ACE ‘ s roots stretch back to 1968 when MoneyMart was founded in Denver, Colorado. By the early 1980s, MoneyMart operated a sizable network of 70 check-cashing stores in Colorado and in Dallas and Houston, Texas. This degree of consolidation was rare in the check-cashing industry, as most businesses were owned individually. Yet more was to come. In 1984, Associates Corp. (a division of the financial services giant Gulf + Western Inc.), acquired the MoneyMart chain to complement its thriving money order business. After renaming the stores Associates Cash Express in 1984, Gulf + Western added 20 new stores to the chain by 1985. By 1986, Associates was by the far the biggest name in the industry.
That same year, two Gulf + Western executives recognized Associates Cash Express ‘ s prodigious revenue-generating potential. Wallace Swanson and Don Neustadt (then the president of Associates Corp. ‘ s wider money-order operations) joined together with a group of private investors to acquire the entire Associates Cash Express division for approximately $5.5 million. Rechristened ACE Cash Express, the now-independent company concentrated on maintaining its sizable lead in the burgeoning check-cashing market.
Although still burdened by an unsavory reputation, the check-cashing industry was flourishing nonetheless. Fueled in large part by the deregulation of the financial services industry in the early 1980s, check-cashing outlets laid claim to a growing number of customers. Deregulation had increased competition in the American banking industry, and as banks cast about for more profitable ways to do business, many began charging for basic services such as check cashing, thereby deterring many potential lower-income customers who could not or would not pay such fees. Exacerbating this trend was the fact that most banks went so far as to refuse to cash checks for those without an account at the bank (even for government-issued checks), and many raised the fees they charged to provide checking accounts, or levied penalties on accounts that dipped below a minimum balance. Moreover, as they sought further cost-cutting measures, banks closed less profitable branches in low-income neighborhoods, leaving whole classes of people without easy access to mainstream banks.