Fringe Banking in Milwaukee: The Rise of Check-Cashing Businesses and the Emergence of a Two-Tiered Banking System

In: Urban affairs review, Volume 34, Issue 1, p. 126-149

Abstract

Check-cashing businesses constitute a growing industry, particularly in low-income and non-white neighborhoods. This case study of Milwaukee, Wisconsin, finds that check-cashing businesses are concentrated in the central city while conventional banks are concentrated in outlying city and suburban communities. These services are growing, despite relatively high fees, primarily because of their convenient hours and locations for central-city residents, exclusionary behavior by conventional institutions, and financial problems of area households. More effective marketing by conventional banks and more aggressive enforcement of community reinvestment requirements by regulatory agencies would blunt development of two-tiered banking and facilitate revitalization of distressed communities.