Bank of Wal-Mart: Better Than Loan Sharks
Wal-Mart’s bank gets hotly debated in BusinessWeek and Advertising Age today. The main argument in favor of the company getting into banking? It’d be better than loan sharks.
In a classic case of being the lesser of two evils, Wal-Mart’s financial services are a far cry from the poverty cure Advertising Age paints them to be. While it’s true that Wal-Mart’s rates are lower than check cashing services, neither are sustainable routes to fiscal solvency for low-income shoppers. The fact remains, as Advertising Age points out, that exploiting the poor is a big market and is indeed one of the ways Wal-Mart makes its billions.
Wal-Mart: Stay Out of Banking, Period [BusinessWeek]
Pro: Not in the Best Interest
The Independent Community Bankers of America (ICBA), representing 5,000 small financial institutions nationwide, strongly opposes the entry of commercial enterprises such as Wal-Mart (WMT) into retail banking. ICBA has nothing against Wal-Mart stores, just Wal-Mart banks.Con: Simply Filling a Need
The hue and cry over Wal-Mart’s attempts to expand its financial-services business is largely motivated by a single fact: The company will offer these services at a lower cost to the consumer, taking revenue away from competitors that happen to include banks. So what else is new?
Forget Going Upscale—Wal-Mart Should Serve Needs of Poor, Seniors [Advertising Age]
Serving the poor is a big market, and providers like to say how proud they are to give credit and debt products to people who couldn’t get them from traditional lenders. But the interest they have to pay for such services is astronomical, and many people are left holding the bag for thousands of dollars in interest or being unable to pay their mortgages, leading to the current subprime-lending mess.
More on Wal-Mart’s banking practices >>
Posted by Alex Goldschmidt on Monday, July 09 | 42 comments | Permalink
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.
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Posted by Alex Goldschmidt on Monday, July 02 | 26 comments | Permalink
An Analysis of the Non-Banker
Grandma stuffing money under the mattress isn’t the only one living outside the banking system.
As many as 28 million people in the United States are forgoing traditional financial institutions because of mistrust, cultural and language barriers or a belief that by the time all the bills are paid there will be nothing left for an account.
That can be expensive and risky. People can run up big fees to cash checks, pay bills and meet their other financial needs. Walking around with large amounts of cash can make them a target for thieves.
The bankless are estimated to earn hundreds of billions of dollars a year in income. Seeing a business opportunity, banks are trying to draw in these potential customers. So, too, are check-cashing businesses and retailers, including Wal-Mart.
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Posted by Alex Goldschmidt on Monday, June 25 | 2 comments | Permalink
Wal-Mart Banks on the Unbanked
“[W]hen Wal-Mart decides it cares about a business, they usually find a way to dominate it.”
Wal-Mart’s Unbanking Business [Time]
Wal-Mart doesn’t just want you to buy gas and groceries at its superstores these days. Now it wants your entire paycheck.
On Wednesday, the nation’s largest retailer unveiled plans to open 1,000 in-store MoneyCenters aimed at serving the 40 million or so people without traditional bank accounts. The main draw at the centers, which will be in about a quarter of all Wal-Mart stores by the end of 2008, is the cashing of government and printed payroll checks for the bargain price of $3 a pop. The retailer is also debuting a reloadable, prepaid Visa debit card that does not require a bank account or proof of U.S. citizenship.
This broad rollout of low-priced check-cashing and debit cards marks a milestone for the millions of “unbanked” Americans who have long had to pay rates as high as 10% of the face value of their paychecks in order to cash them and then pay cash for every single purchase they make because they do not qualify for a credit card or checking account. “These are our core customers. We probably have more than others of this underserved customer,” says Jane Thompson, president of Wal-Mart Financial Services, who notes that the average check-cashing customer at Wal-Mart earns $350 per paycheck and has never had a credit card before.
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Posted by Alex Goldschmidt on Thursday, June 21 | 10 comments | Permalink
Banking? Who, us??
Wal-Mart has been trying unsuccessfully to get in to the banking industry for months. Click here for an archive of stories relating to the company’s attempts.
Wal-Mart’s New Nonbank Bank [BusinessWeek]
Earlier this year, on Mar. 16, Wal-Mart Stores abandoned plans to create its own bank. The retailing giant withdrew its application for a bank charter in the face of tremendous opposition from competitors, as well as from politicians in Washington and state capitals.
But the world’s largest retailer certainly hasn’t given up hopes of taking on the financial-services industry. On June 20, the Bentonville (Ark.) company came back with an announcement that it will offer a host of financial services to its customers through WalMart MoneyCenters, including check cashing, bill payments, and international money transfers. Wal-Mart will open financial-service centers in 450 stores by the end of 2007 and in 1,000 stores by the end of 2008.
As part of its services, the company will issue a Wal-Mart MoneyCard, a prepaid Visa card, which will cost $8.95. It can be used like a credit card to shop online, and to pay for gasoline and merchandise at other retailers. The card will be available at most Wal-Mart stores by yearend. “Many of our customers are paying too much, traveling too far, and not being well served,” says Jane Thompson, president of Wal-Mart financial services.
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Posted by Alex Goldschmidt on Thursday, June 21 | 21 comments | Permalink
In Through the Back Door: Wal-Mart Banking
At Wal-Mart, a Back Door Into Banking [New York Times]
Wal-Mart failed to get approval for a bank. But the giant discount chain is effectively building one anyway.
Wal-Mart said yesterday that it would rapidly expand the financial services offered in its vast network of stores, extending the reach of its retailing empire into its shoppers’ wallets and the traditional turf of the American banking industry.
Over the next year, the company plans to introduce a prepaid debit card, intended for low-income consumers, and install money centers — which currently offer check cashing, bill paying and money order services — into at least 1,000 stores, up from 225 now.
The moves are seen as a precursor to even wider offerings, like mortgages and home equity loans, which could turn Wal-Mart into a significant force in the banking world. Jane J. Thompson, the president of Wal-Mart financial services, called the prepaid cards and money center services “foundational products” that the retailer would build upon. “Our concept is to go up the credit ladder of financial services,” she said in an interview.
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Posted by Alex Goldschmidt on Thursday, June 21 | 9 comments | Permalink
Wal-Mart Announces MoneyCenters, Debit Cards: Targets Low-Income Shoppers
Wal-Mart announces plans to build 800 new MoneyCenters in stores across the country, as well as a new Visa debit card. Neither of these would require a “bank,” per se. Wal-Mart spokespeople claim that this will “help meet the needs of the millions of [its] unbanked and underserved customers.” The company is less eager to emphasize that the card itself costs $9 to buy, has $5 monthly service charges and $4.60 deposit fees. Unless you deposit your paycheck at a Wal-Mart store. Which isn’t in the banking industry. Really.
Wal-Mart expands low-cost banking services [CNN Money]
Wal-Mart on Wednesday announced that it will expand its in-store “MoneyCenters” to about 1,000 locations by 2008...These MoneyCenters will offer customers access to low-cost services such as check cashing, money orders and money transfers.
Wal-Mart to announce new financial services [MarketWatch]
Many of Wal-Mart’s customers feed their families and pay their rents on a paycheck-to-paycheck basis and largely fall under the “unbanked” or “underbanked” group of the U.S. population that has little or no access to banking services, according to the company. The popularity of its check-cashing and money-order services - all substantially cheaper than a typical currency exchange - underscores that as do its low rates on money transfers to Mexico. Wal-Mart recently brought out the express payments service to electronically send payments to major companies.
Wal-Mart to Expand Banking Services [New York Times]
The move is seen as a precursor to wider offerings, like home equity loans and mortgages, which could turn Wal-Mart into a significant force in the banking world. Jane Thompson, the president of Wal-Mart financial services, called the prepaid cards and money centers “foundational products” that the retailer would build upon.
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Posted by Alex Goldschmidt on Wednesday, June 20 | 53 comments | Permalink
New Report from Wal-Mart Watch: Wal-Mart in Crisis
At its annual shareholder meeting earlier this month, Wal-Mart announced plans to slow construction of new domestic stores, a first in the company’s history. Wal-Mart’s business model has depended on new store construction to remain successful, and this announcement has major implications for the company. Our new report, “Wal-Mart in Crisis: How the World’s Largest Retailer Lost its Way,” examines what these developments mean for Wal-Mart. From the introduction:
Wal-Mart’s attempts to sustain its growth during the past few years have been met with enormous challenges and setbacks. Its same-store sales numbers are down, its stock is flat, its growth has leveled off and it is continuously plagued by self-inflicted public relations problems. While other large U.S. retailers like Target and Costco are prospering, Wal-Mart is floundering…
This special report from Wal-Mart Watch, “Wal-Mart in Crisis: How the World’s Largest Retailer Lost Its Way,” provides insight into the dilemma Wal-Mart faces as it attempts to turn its massive ship around. It examines the immediate and long-term growth problems of the company and offers evidence that Wal-Mart must re-examine its business model to sustain itself and adequately address upcoming challenges.
Click here to download the full report (PDF) >>
Posted by Media Team on Wednesday, June 20 | 8 comments | Permalink
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