What do automated teller machines, check-cashing services and tax preparation services have in common? They are all part of the broader financial services industry. You may be surprised to hear this, but that industry is not only alive and well, it’s growing—and it’s filled with franchise opportunities for budding entrepreneurs willing to pursue them.

The U.S. Department of Labor projects that the financial services industry will grow faster than the average for all types of businesses from now through 2014. In fact, it expects financial services to add 2.2 million new jobs over the 10-year period 2004-2014. While much of that growth will come in sectors such as traditional banking, investment banking, financial planning and related fields, the halo effect extends to areas such as non-bank ATMs, accounting, tax preparation, etc.

Let’s start with non-bank ATMs. Like conventional ATMs owned and operated by banks and often located in a bank’s lobby area, nonbank (also referred to as ISO, for independent service organization) ATMs exist primarily to dispense money to cash-strapped consumers.

ATMs first appeared on the scene around 1967 and slowly proliferated over the next 15 years. Growth really began to take off around 1983, with the number of machines worldwide surpassing 1 million in 2001, according to Retail Banking Research (RBR), a leading industry consulting firm. There are now about 1.8 million ATMs around the globe, with the total projected to increase to 2.5 million in 2013.

In recent years, most of that growth has been driven by ATMs located off-site, i.e., not within the confines of a bank. In North America, for example, off-site installations grew at a rate of 24.4% for the period 2003-2007, more than 10 times the overall growth rate of 2.2%. Off-site ATMs accounted for more than two-thirds of all installations in 2007, a whopping 321,000 machines.

Looking just at the U.S. market, about 70% of all installations are now off-site, according to RBR. Of that number, only about a quarter are being deployed by banks; the remaining 75% are being installed by ISO (non-bank) companies, some of them franchised.

Today, ATMs can be found just about everywhere. Among the most popular locations are convenience stores, supermarkets, other types of retail outlets, workplaces, shopping centers, bars and nightclubs, gas stations, municipal buildings, colleges and universities, subway and railroad stations and even hospitals.

A number of factors are driving the growth of off-site ATMs, according to RBR’s research. Topping the list is that they are powerful traffic and revenue generators, effective at drawing customer traffic to retail locations. ATMs are also benefiting from broader demographic trends, particularly population growth.

In recent years, the barrier to entry into this business has been driven down by a new generation of ATMs that are cheaper to build, operate and maintain. Related costs, such as communication charges, have also declined due to the spread of IP (Internet Protocol) technologies.

While dispensing cash remains the primary activity for which most ATMs are used, new business opportunities are likely to emerge from value-added services going forward, such as check cashing, automated deposits, third-party advertisements, purchase of cell phone minutes and bill payment. As ATMs become more technologically advanced and evolve into multimedia kiosks, they will present a stronger interface with customers and generate a variety of business opportunities.

One aspect of the ATM business that appeals to some franchisees is that they can start out doing it as a part-time pursuit, with the option of going full-time in the future. "The fact that it was something I The financial services industry is not only alive and well, it is on a growth track. Dollars and Sense: Opportunities in Financial Services By Michael J. McDermott could do part-time while continuing to work at my regular job is one of the things that originally attracted me to it," says Michael D., a franchisee who got into the business several years ago. "I did that until the income I was generating from my franchise began to outstrip what I was making from my job, then I decided to go full-time with the franchise."

Michael says finding a franchise business that would provide residual income was key for him. "One thing that came through loud and clear to me while I was doing my research was that the types of small businesses that seemed to flourish and remain profitable all generated some kind of residual income stream," he says.

Another factor that tilted him towards the ATMbusiness was that he didn’t have to resell the same thing every month. "Once you make the initial sale, that’s it," he says. "The sales cycle may be a little longer than with some other types of businesses, but once you complete the sale, it continues to generate revenue for you for years to come. You get paid over and over again."

Check-cashing services represent another promising growth area for franchises in the financial services area. Financial Service Centers of America (FiSCA), a national trade association representing the industry, points out that "check-cashing" is not really an accurate description of this type of business, since most of its members also offer a variety of other financial services.

"In addition to check cashing, CCOs (check-cashing organizations) may also provide a wide array of secondary services, the most prominent of which is the issuance of payday cash advances, or small-denomination, unsecured loans," explains Mark Gottlieb, a business valuation expert. "These loans are typically due on the customer’s next payday. In providing these loans, CCOs compete with ‘payday advance centers,’ an offshoot of the CCO industry."

There are more than 13,000 multi-line financial service center locations nationwide, conducting more than 350 million transactions per year, according to FiSCA. Those transactions provide an estimated $106 billion in various products and services to about 56 million consumers annually, and the industry employs upwards of 60,000 people.

The typical CCO customer is slightly younger than the general population and has a low to moderate level of income. Seventy-five percent of CCO patrons are employed full-time, and 58% maintain at least one traditional bank account, according to FiSCA’s research.

There are several reasons people use check-cashing services. "Waiting a week or more for a check to clear the banking system is not an option for many CCO customers, as these individuals are often living day-to-day with regard to finances," Gottlieb says. Also, the account balances of many people are so small after basic living expenses that little remains after the second week of the month, he adds. "Many individuals live in a cash economy, where businesses supplying food, clothing and other necessities view checks skeptically and generally will not accept them," he says. "Finally, many individuals simply do not trust banks. They are reluctant to write checks for fear of bounced-check fees."

Nearly 13% of families in the U.S. do not have a checking account at a bank, and surveys indicate that most of these consumers are "un-banked" by choice. They most often rely on alternative means to carry out basic financial transactions, such as cashing payroll checks and paying bills. The check-cashing industry provides them with an array of services, many of which are not offered by conventional banks. Among them are:

In addition, check-cashing businesses that belong to FiSCA can offer their customers a unique, interest-bearing, federally-insured savings account linked to a prepaid debit card. Unlike most bank savings accounts, there are no minimum deposit or minimum monthly balance requirements and no monthly service fees with these accounts. The accounts also provide customers with access to electronic commerce.

The check-cashing industry satisfies the financial needs of its customers in ways that accommodate their other vital needs, including convenience, cultural sensitivity and fast, respectful service, says a FiSCA spokesman. Traditional financial institutions often fall short by those measures, he says.

In a national customer satisfaction survey conducted for FiSCA, 64% of respondents singled out convenient locations as their primary reason for choosing a CCO. Traditional financial institutions are often difficult to find in working-class and minority neighborhoods, having concentrated their locations in middle- and upper-class suburbs, the spokesman says, adding that check-cashing stores also offer better hours to accommodate varying work schedules.

Many are open seven days a week, and some operate 24 hours a day. Recently, the U.S. Treasury Department commissioned Dove Consulting to conduct a survey of non-bank financial institutions such as CCOs, and the findings were illuminating. Among the researchers’ main findings were:

Consumers in the Dove survey gave multiple reasons for choosing a check-cashing outlet over a checking account at a traditional bank:

"The outlook for the check-cashing industry is positive with respect to continued growth," Gottlieb says. "The greatest growth is expected to come from the suburban market, though this should vary by county and state. Growth will be achieved through a continuation of marketing via a variety of advertising vehicles, and CCOs are expected to continue beyond simple marketing, embracing the concept and value of branding."

As Benjamin Franklin famously noted, "Nothing is certain but death and taxes." The renowned statesman was musing on the likelihood of the recently enacted U.S. Constitution surviving into the future, but the concept of taxes has shown just as much staying power. That’s good news for prospective franchisees interested in owning a tax preparation franchise.

The U.S. tax preparation industry has experienced significant growth over the past several years, due at least in part to the increasing complexity of the tax code. Another factor in that growth has been the easy availability of the industry’s services in numerous locations throughout the country, according to "U.S. Tax Preparation Industry: Increasing Adoption of EFiling," a new report from Research and Markets Ltd.

The report states that in 2007 more than 60% of individual filers in the U.S. used the services of paid preparers to file their returns. Last year, about 80 million taxpayers filed their returns electronically. The IRS is operating under a federal mandate to reach a point where, eventually, almost all returns will be e-filed. At the same time, the total number of returns being filed is growing at a rate of about 2 million per year. All those factors bode well for the future of the tax preparation industry.

"The industry as a whole generates income from three individual market segments that are classified on the basis of income and tax-filing behavior," says a spokesman for Research and Markets. "The largest segment, in terms of revenue generation for tax preparers, consists of individuals with annual income under $100,000. Complexity of the tax code is the primary motivating factor for that segment to use a paid preparer."

While the use of e-filing provides significant cost savings to the government, it has also proved to be very popular with taxpayers because it allows them to get their refunds more quickly. Many tax preparation businesses are leveraging that to their advantage by offering their customers "instant refunds," which are basically loans secured by the expected refund.

"Electronic filing reduces the amount of time it takes for a taxpayer to receive a federal tax refund and provides a greater guarantee to the taxpayer that the return is mathematically correct," says a spokesman for the IRS. "E-filing uses automation to replace most of the manual steps needed to process paper returns, resulting in faster and more accurate processing."

Additional franchise opportunities exist in other segments of the financial services industry, as well. For example, some franchises provide small businesses with an array of financial services, including business consulting, tax planning, financial reporting, payroll and more. Other franchises offer retirement and financial planning for individuals, credit repair services, factoring, fund-raising for nonprofit organizations and more.

No matter what type of financial services franchise you choose, you can expect to get initial and ongoing training from the franchisor, help with launching your business, and the continued support of a network of other franchisees engaged in the same business.

Franchising offers meaningful opportunities in many industries, and financial services is no exception. Readers will find dozens of such opportunities listed in the directory section of this issue of The Franchise Handbook. The Category Index on the last page of the book may also be useful, and even more information is available at www.FranchiseHandbook.com. An old English proverb proclaims that, "Money begets money." In the case of franchise businesses in the financial services industry, that promise rings true.