Wal-Mart’s Banks No Help to Bankless Customers
“These cards are loaded with hidden fees,” Wexler said. “And many consumers will find that there are cheaper and more practical options elsewhere.”
Wal-Mart banks on its (non) bank [Florida Sun-Times]
Following years of failing to get a bank charter, Wal-Mart has entered the financial fray with a broad selection of financial services, from check cashing to a Visa-branded card with nary an overdue charge.
The world’s largest retailer plans to open 2,000 MoneyCenters in its stores, up from its current 225 locations. At least one will be in Jacksonville, located in Mandarin at 9890 Hutchinson Park Drive.Slated to open by the end of 2008, this is a rapid rollout of financial services, including check cashing and a prepaid, reloadable Visa card, geared for those who don’t pass muster during the credit check process required for typical credit cards. Wal-Mart says the expanded selection will provide low-cost banking options to those who don’t have traditional bank accounts.
“With the Wal-Mart MoneyCard, our customers can do things that they couldn’t do before - shop and pay bills by phone or online, pay at the pump and use ATMs across the country,” said Cindi Marsiglio, a Wal-Mart spokeswoman.
But critics are charging that Wal-Mart is sneaking into banking, a venture it appeared to abandon after being legally rebuffed by the Federal Deposit Insurance Corp. Nu Wexler, a spokesman for watchdog group Wal-Mart Watch, says the retailer’s financial services are so loaded with extra costs and fees, it exploits the very customers they say they want to help.
“Wal-Mart has applied for a bank charter [several] times, and they’ve been rejected each time,” Wexler said. “It’s a testament to their poor reputation and political baggage.”
Watchdogs fear incursion; firm says service has value
Wal-Mart’s MoneyCenters aren’t chartered banks like Bank of America or Wachovia, for example, and it doesn’t offer all the same services as banks, like loans. But Wal-Mart, which withdrew its request for a bank charter in March, says it plans to offer even more financial services after this initial rollout.
Wal-Mart first applied for an Industrial Loan Co. charter, specifically tailored for existing corporations, in 2005 - but the company withdrew the application amid concerns that the mega retailer would overtake the national banking industry.
Wal-Mart insisted it was not aiming to create a full-service bank for consumers, as critics claimed.
“We currently pay a third party a small processing fee for each debit, credit and electronic check transaction,” said Wal-Mart spokeswoman Marsiglio. “The creation of our own industrial bank would have allowed us to pay our own bank to do that for less and pass the savings on to our customers in the form of lower prices.”
But organizations such as the American Bankers Association say the creation of a corporate bank would erode the difference between commerce and financial institutions.
“Wal-Mart certainly shouldn’t have an ILC charter, and we’ve been trying to push them out with legislation,” said John Hall, ABA spokesman. Such banks jeopardize equitable financial regulation and could potentially form conflicts of interest, he said.
Wal-Mart Watch was another such organization aiming to block Wal-Mart from acquiring an ILC charter.
“Wal-Mart is not ready to have its own bank; it’s too sensitive a market for them,” Wexler said.
He says he’s not buying Wal-Mart’s claims it had no interest in opening its own consumer bank. “Nobody believes them,” he said. “The fact that they’re going through a back door now validates those earlier concerns.”
This latest venture does nothing to quell some’s fears that the retailer’s competitive prowess will negatively pressure competing businesses, but the question of how much impact Wal-Mart will have on the fragmented banking industry is still under debate.
Wal-Mart’s entry into the financial fray will force check cashing businesses to innovate their products and adapt to a more competitive environment, said Cynthia Vega, spokeswoman for the trade organization Financial Service Centers of America.
Wal-Mart may chomp at some of the industry’s business, but the industry’s core customers, often low income and without reliable transportation, choose locations based on convenience over potential savings, she said.
“They’re opening up 1,000 in their location, but there are 23,000 check cashers nationwide,” she said. “By nature, they’re more convenient. We can’t imagine that any of them would choose to drive 15 minutes out of their way, even if they’re going to save 50 cents.”
John Hirabayashi, president and chief executive officer of First Coast Community Credit Union, isn’t exactly worried about Wal-Mart’s stab at financial services. That’s because Wal-Mart is aiming for a specific niche of customers who are often unattractive to other banks, he said. He acknowledged banks could stand to do a better job of catering to those customers - and perhaps defuse the Wal-Mart effect in the process.
“They’re going for people who may have had a few bad checks, problems with their accounts,” he said. “And those numbers are growing.”
Sidestepping FDIC to profits
The combination of retailing and banking has proven to be an oft-controversial concept.
Although Kroger, a large supermarket chain, has successfully began offering mortgages and loans, others have been met with more resistance. Home Depot, for example, was also denied the right to form a bank that would have offered loans for customers’ home improvements. Earlier this year, the FDIC imposed a temporary moratorium on corporations creating banks unless they generate at least 85 percent of their revenue from financial services.
But Wal-Mart has side-stepped that roadblock because it is not a chartered bank with such services as savings accounts, loans or mortgages.
Rather, the company is aiming for lower-income customers and the 9 percent of U.S. families who don’t have bank accounts, a demographic that seems to coincide with the company’s low-price mentality. Arguably, Wal-Mart’s prices will be cheaper than other check cashing institutions that also offer pre-paid Visa cards. Advance America, for example, charges $9.95 to start such a card, about a dollar more than Wal-Mart’s MoneyCard. Many check cashing businesses charge a sliding fee to cash a check, sometimes up to 10 percent of the check’s value. Wal-Mart charges a $3 flat fee.
The company is expected to earn a healthy profit on such services.
“These services are typically high-margin,” said Bart Weitz, director of the Miller Center of Retail Education and Research at the University of Florida. “This is a brilliant move for Wal-Mart: It has an immediate payoff.”
Wal-Mart says this new program will save customers 25 percent to 50 percent on such services. It offers free MoneyCard balances to customers via cell phone and text message, the company pointed out.
But what about those low-income folks who don’t have access to a computer or cell phone, asks Wal-Mart Watch’s Wexler. A paper statement will cost consumers $2 a pop and check cashing $3, services that are normally free to a typical bank member. Wexler said the retailer is taking advantage of the demographic it so feverishly courts.
“These cards are loaded with hidden fees,” Wexler said. “And many consumers will find that there are cheaper and more practical options elsewhere.”
In an informal Times-Union comparison, Wal-Mart’s fees (such as a 75-cent ATM fee) were comparable - and often less expensive - than similar businesses, such as check cashing businesses. But bank members often receive the same services - like ATM withdrawals - for free.
Retailers branching into other industries are increasingly common, Weitz says. Winn-Dixie is adding clinics where customers can get flu shots and Best Buy installs car stereos.
“This is a wide-sweeping trend in that retailers are providing more services, not just selling the merchandise,” he said. “It’s about that one-stop shopping experience, and trying to get them to come more often.”
Posted by Alex Goldschmidt on Monday, July 02, 2007
COMMENTS
All I can add is to Google the words Chex Systems Bites, and Mr. Wexler and company can look and see for themselves the intended market for any prepaid Visa card, regardless of who is offering it (at first glance, it appears that Walmart’s card has lower fees than the rest of the competition).
It is these same groups of people who are continually rebuffed by the Wachovias and Bank of Americas of this country.
Mick in
Monday, July 02 at 11:49 AM
WalMart- What we really want is all the unspent money from your paycheck on a WalMart debit card in a WalMart credit system economy with FDIC insurance. The paradox of thrift tells us that you have money you are not spending at WalMart. We can fix that.
WalMart/Waltons/Thurston Howell- Get us another drink Gilligan you slave and put it on your card.
SanDiegoView in
Tuesday, July 03 at 08:16 PM
Ginger or Mary Ann?
Ken V in Texas
Wednesday, July 04 at 02:02 PM
SanDiegoView and Ken V in Texas,
You two maroons missed something in your “Gilligan’s Island” analogy:
The money, itself, is held/handled by GE Money Bank, the same company that does financial services for JC Penney, among others...
Bill
Bill in
Thursday, July 05 at 08:50 AM
From PBS June 21 2007-
MARGARET WARNER: Now, let’s go on to from Wal-Mart’s perspective. If you go in, and you take your weekly paycheck, and you deposit it essentially on your debit card, then Wal-Mart is not only going to make the fees, right, but they’ll get the use of that money without paying you any interest?
MICHAEL BARBARO: Well, when you go use that pre-paid debit card, the transaction fee—the people who will probably make the most money will be the company that issues the card. In this case, it will be their partner, General Electric.
Now, what Wal-Mart has talked about in the future is helping people who use these cards eventually save money. Right now, you simply bring in your paycheck, put money on this card. It’s not really doing a lot for you on that card; it’s not going to have any interest. You can’t invest it in a 401(k). You really can’t do anything with it. And the next step, Wal-Mart says, is to come up with a way to take the money on the card and make it actually do something for the people who put it on there.
http://www.pbs.org/newshour/bb/business/jan-june07/
walmart_06-21.html
GE is partnered with WalMart as the issuer of the cards. WalMart is not turning over their now FDIC insured card deposited assets to GE. This is money operating on a WalMart debit system with other electronic access such as ATMs and extending the electronic bill pay system. The money loaded onto the WalMart Money Card is not entered onto the GE financial books or held by GE. It is held by WalMart and they get to use the unspent balance of the deposited funds without paying the customer interest for using their money. Charges for the card initially are probably WalMart fees while monthly deposit fees, transaction fees and ATM fees are GE charges or some type of split arrangement on fees. Perhaps you have never heard of ‘overnight accounts’ either.
Gilligan is going to need another vodka when the WalMart/GE vig hits him on fees.
SanDiegoView in
Thursday, July 05 at 02:48 PM
SDV,
“If you go in, and you take your weekly paycheck, and you deposit it essentially on your debit card, then Wal-Mart is not only going to make the fees, right, but they’ll get the use of that money without paying you any interest?”
And, how many of these people, will leave it on the card long enough to earn interest? Besides, aren’t they the people who can’t get bank accounts?
“You can’t invest it in a 401(k). You really can’t do anything with it.”
These people can’t even get a bank account, what makes you think they would put it in a 401K, besides, 401K money is taken out of a paycheck, BEFORE you cash it? And, they can do what they do best with their paychecks, spend it, IT’S A DEBIT CARD (hello), haven’t you ever heard the term ‘living paycheck to paycheck’, this describes the people who will use this service? Isn’t it that way in SDVland?
BTW: What is the interest on $250.00 for 2 days? It was stated here, that the interest at a Payday Loan Center is as much as 400%, which is where a lot of them go now!!
RDS in
Thursday, July 05 at 05:50 PM
“And, how many of these people, will leave it on the card long enough to earn interest? Besides, aren’t they the people who can’t get bank accounts?”
The RDS justification for financial exploitation.
“And, they can do what they do best with their paychecks, spend it, IT’S A DEBIT CARD (hello), haven’t you ever heard the term ‘living paycheck to paycheck’, this describes the people who will use this service?”
The RDS presumption for financial exploitation.
RDS would conclude- Therefore WalMart will retain no use of excess money deposited on these cards by millions of people who earn nothing but fees for maintaining such a card. Since WalMart will not be retaining any significant amount of money from the deposit cards, they won’t be needing FDIC backing on these deposits now will they?
Wal-Mart spokeswoman Marsiglio- “The creation of our own industrial bank would have allowed us to pay our own bank to do that for less and pass the savings on to our customers in the form of lower prices.”
“...our own bank...”
“But Wal-Mart has side-stepped that roadblock because it is not a chartered bank with such services as savings accounts, loans or mortgages.”
WalMart- We are about all kinds of exploitation, not just the low wage labor leader or the health care fraud we dump onto the states for the taxpayer suckers to pay for. We are moving into financial exploitation of the poor with FDIC backing of all the deposits. It is better than our state tax evasion scheme and we need to replace our insurance scam losses. RDS won’t mind paying for most of these scams as a taxpayer WalMart blogger fraud.
SanDiegoView in
Thursday, July 05 at 07:53 PM
A couple of years back in a statement to shareholders Lee Scott lamented the fact that it was estimated that a full 20% of Wal-Mart shoppers didn’t have a checking account, a widely accepted indication of poverty.
Bentonville’s answer: Forget about customers with little money and go after the more lucrative upscale clientel. Well, as we all know, that didn’t work out so it’s back to grubbing for pennies among the great unwashed.
I wonder how long it will be before some genius Bentonville bean counter suggests that rather than issuing associate’s paychecks, they pay them with Wal-Mart debit cards.
How fortunate for leaders that men do not think. ~ Adolph Hitler
Ken V in Texas
Friday, July 06 at 04:15 AM
P.S. Since it’s become fashionable to demand answers to questions posed, I ask again:
Ginger or Mary Ann?
:o)
Ken V in Texas
Friday, July 06 at 04:16 AM
Ken V,
You said - “I wonder how long it will be before some genius Bentonville bean counter suggests that rather than issuing associate’s paychecks, they pay them with Wal-Mart debit cards.”
It may be sooner than you think, as the global society, as a whole, has been moving away from traditional financial instruments like cash and checks in favor of debit networks.
In fact, many employers no longer issue paper checks for payroll purposes and more often than not, direct deposit is a condition of employment for new hires.
That, my friend, is where cards like this come in—they fill that requirement (a place to deposit money) for those who, for whatever reason, cannot get a traditional bank account.
And, if Wal-Mart can turn this into a profitable venture, I say good for them…
Bill
Bill in
Friday, July 06 at 08:34 AM
Bill,
What you are talking about are 21st century ideas, Ken and Screwedby are stuck in the 20th century, so they have little use for the ‘new’ ways of doing things!!
RDS in
Friday, July 06 at 12:08 PM
...moving away from traditional financial instruments like cash...
You bring up an interesting point, Bill. Have you Conservatives and Libertarians given any thought to the ramifications of a cash-less society?
Ken V in Texas
Friday, July 06 at 03:01 PM
“Have you Conservatives and Libertarians given any thought to the ramifications of a cash-less society?”
Like what for instance?
No more bank robberies for cash?
No more pick pockets out for cash?
No more running to ATM machines?
No more fumbling for change?
Saving the government billions of dollars printing and coining?
No more forging paychecks?
All the gas saved, not having to go to the bank every week?
RDS in
Saturday, July 07 at 11:43 AM
Eureka! That’s the Answer RDS!
Everyone in the world works for “The Beast of Bentonville.” We’re all paid the same and have our weekly earnings direct deposited into a debit account that Wal-Mart manages. Of course there’s only one place to spend your money and that’s Wal-Mart. It’s utopia...no more wants...Wal-Mart supplies everything. No more class envy...no more welfare. There’s no more need for war because Wal-Mart owns and controls everything. No nation would stand to gain anything by going to war with another nation because all nations share equally through Wal-Mart.
R-R-R-i-n-g! The Alarm! What? Was it all a dream?
ScrewedbyWal-Mart in Anytown, America
Saturday, July 07 at 01:32 PM
Screwedby,
“Was it all a dream?”
Guess that in your mind, you are living that dream right now!! Someday, Wal-Mart will be the K-Mart of today, when someone comes up with a “better idea”!! We have suggested how the unions could actually work their “better idea” of how to run a retail store chain, but, I guess they have no faith in it!!
As my daughter and grandkids used to say to me, “Move into the 21st Century, will ya.”!!
RDS in
Saturday, July 07 at 10:22 PM
You left out:
No more having or spending money without the government knowing about it.
A cashless society will deal a severe blow to the shadow economy. You big government people will cheer the increase in tax revenues, but it’s been my experience the shadow economy provides the grease for the skids of the economy as a whole.
And, as is the case with so much of our society, if going cashless has negative ramifications, it will be felt at the bottom, not at the top.
I thought Libertarians were supposed to be for the preservation of individual liberties?
Ken V in Texas
Sunday, July 08 at 03:58 AM
Ken V,
“A cashless society will deal a severe blow to the shadow economy.”
Yeah, those drug dealers and prostitutes, would have to start using a debit card reader, kind of hard standing on a corner using it, isn’t it?
RDS in
Sunday, July 08 at 10:40 AM
Ken V,
“I thought Libertarians were supposed to be for the preservation of individual liberties?”
You are right, but, isn’t always the ANTI this and ANTI that people that cause laws and restrictions to be added the individuals liberties? Our founders had a simple concept and through the years, there have always been ANTI people who tried to STOP others from doing things, that’s your crowd, not mine!! A cashless society is a change in procedure, not a limiting of freedom!! Remember, we once upon a time, had a cashless society and bartering and trading were the main method of payment!!
RDS in
Sunday, July 08 at 11:06 AM
Apparently you’ve never owned/operated a business, RDS. Believing the shadow economy is made up solely of drug dealers and prostitutes is yet another example of your narror perspective. The shadow economy is to small business what the tax code is to big business.
understaffing: a double-talk phrase that could be translated as “your time is far less important than our overhead.”
Ken V in Texas
Sunday, July 08 at 04:24 PM
Ken V,
Where did you see any mention of “SOLELY” in my post? But, they are a part of it, aren’t they? Besides, isn’t ‘under the table’ or ‘Shadow’, against IRS tax laws?
RDS in
Sunday, July 08 at 08:59 PM
Besides, isn’t ‘under the table’ or ‘Shadow’, against IRS tax laws?
Yup.
Ken V in Texas
Monday, July 09 at 02:25 AM
Ken V,
“You big government people will cheer the increase in tax revenues”
Big government people? We are not the ones asking for the governmnet to take over the healthcare system, or interfer with business, we want LESS government!!
And, are you saying that the ‘illegal’, anti social groups are the “grease for the skids of the economy as a whole”? Then maybe we need more crime, right? The main driver of poverty, is the government policies and Taxes (over 50%), therefore, to fix the problems, we need smaller government and less taxes, not more, (like funding Universal Healthcare)!! Believe it or not, Wal-Mart is actually helping in the fight on poverty, by offering lower prices, which means lower sales taxes, and allows people to purchase MORE items for the same amount of dollars, without paying more tax!! Try to look at it this way, the more you have to pay for something, the higher sales tax you will pay on that item, thus cutting the value of your dollar even more!! So, if you save $3.00 on an item and sales tax is 8%, you actually saved $3.24 on that item!!
RDS in
Monday, July 09 at 12:46 PM
Tell me, RDS, when you and the wife had that garage sale did you claim the proceeds as income?
In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican. ~ H.L. Mencken
Ken V in Texas
Monday, July 09 at 02:08 PM
Ken V,
“Tell me, RDS, when you and the wife had that garage sale did you claim the proceeds as income?”
No, because we were not selling ‘new’ products for resale!! And, we were not making a profit, just recouping a very small portion of the value we paid for the items sold!! But, we did have to notify the local government and pay for a permit, so I guess you could say we were taxed!! We did not make any income, because we were selling at a loss!!
RDS in
Monday, July 09 at 11:05 PM
No, because we were not selling ‘new’ products for resale!!
You can rationalize it anyway you want, RDS, but the fact is your garage sale is part and parcel of the shadow economy and in the event of a cashless society you would need a debit card reader to collect and then the government would get to decide if it’s income or not.
**note: Most muncipalities make allowances for a limited number of garage/yard sales per year but that’s not the point. The point is, everyone participates in the shadow econcomy to some degree and you can’t do away with it without reducing individual liberty and <b>privacy!</i>
What fun would it be to sleep on a matress stuffed with debit cards?
Ken V in Texas
Tuesday, July 10 at 06:04 AM
http://2da2ae2e343ebfa440f8a3a29e61acf0-t.zjdicn.org 2da2ae2e343ebfa440f8a3a29e61acf0 http://2da2ae2e343ebfa440f8a3a29e61acf0-b1.zjdicn.org 2da2ae2e343ebfa440f8a3a29e61acf0 http://2da2ae2e343ebfa440f8a3a29e61acf0-b3.zjdicn.org 9b90290ebc5b707b8f998fd2e6478888
Jasper in Broderick
Monday, July 16 at 06:16 AM
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