Why check cashing businesses exist

Podcast: Complex Systems with Patrick McKenzie (patio11) (LS 45 · TOP 1% what is this?)
Episode: Why check cashing businesses exist
Pub date: 2026-02-05

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Patrick McKenzie (patio11) reads an essay about the business of check cashing, a misunderstood industry. He explains why cashing a check is actually a "new credit extension" where the bank bets on both the writer and the payee, and why profit-maximizing institutions often decline to bank individuals who represent even a "material risk" of a single bounced check. From the manual "rituals" of endorsement to the way fintechs like Ingo Money and Cash App use persistent identity to narrow the risk envelope, Patrick examines the technical and social reasons why some people pay to access their own wages, others don’t, and whether we can do anything about that.

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Full transcript available here: www.complexsystemspodcast.com/check-cashing/

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Presenting Sponsor: Mercury
Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires, so you can stay focused on growing your business. Apply online in minutes at mercury.com.

Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.
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Links:

• Bits about Money: www.bitsaboutmoney.com/archive/the-business-of-check-cashing/ 

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Timestamps:
(0:00) Introduction
(2:15) Check cashing
(2:57) An oversimplified explanation of check presentment
(5:48) Depositing a check requires an extension of credit
(10:47) How cashing a check works if you're not banked
(12:16) A brief aside about endorsement
(14:39) Many people hate check cashing and everything about it
(17:06) The internal logic behind that pricing grid
(19:59) Sponsor: Mercury
(21:36) The internal logic behind that pricing grid (continued)
(23:10) Persistent  identities as a KYC possibility
(25:12) A brief discussion about class distinctions in America
(30:45) Check cashing on phones
(34:28) Outro

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