Wal-Mart’s Money Card Targets Low Income Shoppers
A story in the Financial Times on Wednesday revealed Wal-Mart’s plan to market a Visa-branded money card. The prepaid cards will be available for purchase at Wal-Mart, and give the company a convenient back entrance into banking. These types of cards are generally targeted at low income shoppers who do not have bank accounts. As Marketplace explores, this is yet another way that Wal-Mart profits off its customers’ poverty.
Making it easier for the poor to spend [NPR’s Marketplace]
Wal-Mart plans to unveil a pre-paid Visa card aimed at the 80 million U.S. residents who don’t have bank accounts. Steve Tripoli reports that the nation’s largest retailer may have something to teach competitors about servicing the poor.
Kai Ryssdal: Remember not too long ago Wal-Mart tried to get into the banking business? Ferocious opposition from the banking lobby played a role in stopping that attempt. But it’s not stopping Wal-Mart from offering an ever-larger menu of bank-like services.
A report in the Financial Times today said the next step will be something called the Wal-Mart Money Card. Essentially, it’s a pre-paid Visa aimed at the 80 million U.S. residents who don’t have bank accounts.
It’s not altruism, to be sure. But Marketplace’s Steve Tripoli tells us the nation’s largest retailer may have something to teach competitors about the upside of serving the poor.
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Posted by Alex Goldschmidt on Friday, June 08 | 19 comments | Permalink
Wal-Mart Persistent in Bank Attempt
Retailer’s alternative to small change [Financial Times]
When Wal-Mart, the largest US retailer, filed an application three years ago to win federal approval to set up a state-chartered bank in Utah, there was a storm of opposition from the US banking industry, fearful of the competitive threat posed by the world’s biggest retailer. In March, Wal-Mart gave up and withdrew its bank application, while saying it would continue to develop the range of financial services it is permitted to offer its customers. Now a planned move by Wal-Mart into the business of stored value payment cards demonstrates that its competitive challenge to the country’s largest banks remains. Wal-Mart has not released any details yet of its planned Wal-Mart Money Card. But the introduction of a reloadable stored value card puts the retailer into competition with the banks’ efforts to tap into a potentially lucrative market represented by the 80m Americans who do not have bank accounts. The new Wal-Mart card, to be issued with GE Money, will be modelled on a Visa prepaid card that offers holders some of the security of a regular bank account, such as not having to hold loose cash, but without having to hold a minimum balance, pay charges for cheque books, or having to submit documentation. Card holders can have their pay transferred directly into the card, then use it to buy goods through the Visa network or to withdraw cash from ATMs or to pay bills.">Retailer’s alternative to small changeWhen Wal-Mart, the largest US retailer, filed an application three years ago to win federal approval to set up a state-chartered bank in Utah, there was a storm of opposition from the US banking industry, fearful of the competitive threat posed by the world’s biggest retailer. In March, Wal-Mart gave up and withdrew its bank application, while saying it would continue to develop the range of financial services it is permitted to offer its customers. Now a planned move by Wal-Mart into the business of stored value payment cards demonstrates that its competitive challenge to the country’s largest banks remains. Wal-Mart has not released any details yet of its planned Wal-Mart Money Card. But the introduction of a reloadable stored value card puts the retailer into competition with the banks’ efforts to tap into a potentially lucrative market represented by the 80m Americans who do not have bank accounts. The new Wal-Mart card, to be issued with GE Money, will be modelled on a Visa prepaid card that offers holders some of the security of a regular bank account, such as not having to hold loose cash, but without having to hold a minimum balance, pay charges for cheque books, or having to submit documentation. Card holders can have their pay transferred directly into the card, then use it to buy goods through the Visa network or to withdraw cash from ATMs or to pay bills.
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Posted by Alex Goldschmidt on Thursday, June 07 | 9 comments | Permalink
Investment Firm Expresses Concerns Over Wal-Mart’s Behavior
F&C Assest Management, a UK-based investment fund with holdings of Wal-Mart stock, has criticized the company for its apparent inability to comply even with its own behavioral standards. F&C, which holds approximately $21,932,450 worth of stock in the company, filed one of the several resolutions to be discussed at the annual shareholders meeting tomorrow.
F&C itself claims a strong code of social responsibility, including best community practices, high environmental standards and encouraging clients to improve their own corporate behavior. From the group’s website:
One way in which investors can express their responsibilities is to use their influence as shareholders to seek to encourage companies to improve their business practices with regard to important social, ethical and environmental issues.
Were all of Wal-Mart’s investors to demand the company act responsibly, surely it would be forced to listen.
Wal-Mart shareholder cites corporate governance failures before retailer’s AGM [Forbes]
F&C Asset Management PLC said it has co-filed a shareholder proposal over concerns that Wal-Mart Stores Inc, the US supermarket group, is failing to comply with its own governance standards. This proposal comes ahead of Wal-Mart’s AGM tomorrow.
Karina Litvack, head of governance and sustainable investment at F&C, said, despite strong policies on paper, Wal-Mart has struggled to implement its standards across its US business.
‘Weaknesses in internal controls have eroded the company’s reputation as an attractive employer and are adding fuel to the fires of Wal-Mart’s critics,’ she said.
She added: ‘We fear that its failure to deliver on these policy commitments is inhibiting Wal-Mart’s ability to expand into new domestic markets.’
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Posted by Alex Goldschmidt on Thursday, May 31 | 1 comments | Permalink
House Bill Would Limit Industrial Banks
From Associated Press via New York Times:
Legislation barring commercial companies like Wal-Mart and Home Depot from owning a special sort of bank overwhelmingly cleared the House on Monday.
The bill, which passed 371-16, would prohibit nonfinancial companies from setting up or owning so-called industrial loan companies, federally insured institutions that can issue credit cards, make loans and take deposits.
The industrial loan companies, or ILCs, have been proliferating in recent years: there are now 58 with a total of about $200 billion in assets. Thirty-one are based in Utah, one of only seven states that grant charters for such banks.
Critics say the growth of the industrial banks dangerously blurs the line between banking and commerce, concentrating assets in the hands of a few big companies, stifling competition and hurting consumers.
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Posted by Web Team on Tuesday, May 22 | 14 comments | Permalink
Financial Report: Wal-Mart Profits Up, Sales Decline
Wal-Mart profits were up this fiscal quarter, but CEO Lee Scott wishes the company was doing better. Analysts are skittish about next quarter’s prospects: with slim projected increases of 1-2%, Wal-Mart is tenuously close to the edge of domestic sales decline. As the MarketWatch story illuminates, most of Wal-Mart’s growth has been international - US store sales are stagnant and high-margin products like apparel and housewares are sitting on store shelves. According to analysts and Wal-Mart’s spokespeople, this is due to general income worries, customers’ poor fashion sense, and the weather.
Wal-Mart Still Looking Weak [The Street]
Wal-Mart matched first-quarter earnings targets but came up light on sales.
“While these are record sales and earnings, we feel there was an opportunity to have done better,” said CEO Lee Scott.
Wal-Mart profit on mark, but sales fall short [MarketWatch]
Wal-Mart Stores Inc. said Tuesday that first-quarter earnings rose 8%, as robust results from the retailer’s growing international division and at its warehouse stores offset persistent problems in its core U.S. stores.
The world’s largest retailer also signaled that second-quarter results could fall short of expectations. Moreover, Wal-Mart said it would put greater emphasis on its “everyday low prices” to boost traffic and sales…
Though the international division had a “great quarter,” according to Scott, and the Sam’s Club division posted its seventh straight quarter in which profit growth outpaced sales growth, problems at Wal-Mart’s namesake stores in the U.S. continued to dog the company…
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Posted by Alex Goldschmidt on Tuesday, May 15 | 25 comments | Permalink
Wal-Mart Wanders Off
Wal-Mart Loses its Way [TheStreet.com]
There’s wasn’t much love going around for Wal-Mart Tuesday after the retail giant reported a lackluster first quarter and said the second quarter doesn’t look much better.
Wal-Mart’s earnings for the period were in line with forecasts, although revenue was below estimates. Additionally, the company projected second-quarter earnings of 75 cents to 79 cents a share, allowing for downside to Wall Street’s estimate of 79 cents.
While CEO Lee Scott pointed out that revenue and earnings were at record levels, he admitted that “there was an opportunity to have done better.”
Indeed. The company’s sales remained sluggish, and the retailing giant appears to be trying to figure out what it wants to be, even though it’s all grown up.
Shares of Wal-Mart recently were down a modest 18 cents to $47.66. The stock is trading at a historically low multiple of 16.5 times earnings, but now isn’t the time to pile into the shares. There are certainly too many problems—and too much confusion.
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Posted by Alex Goldschmidt on Tuesday, May 15 | 4 comments | Permalink
New Bill Bans Big Box Banks
U.S. Senate bill would block retailers’ banks [Reuters]
U.S. senators introduced on Thursday bipartisan legislation that would block retailers such as Home Depot Inc. from operating a bank. The bill, which is co-sponsored by Democrats Sherrod Brown of Ohio and Tim Johnson of South Dakota, and Republican Wayne Allard of Colorado, mirrors a version that is expected to win approval by the full House of Representatives.
The House is expected to consider it this month.
The lawmakers, who are members of the Senate Banking Committee, said panel Chairman Christopher Dodd has not yet expressed support for the bill.
However, such a ban is opposed by another member of the committee, Utah Republican Robert Bennett, whose state is home to many of the commercially owned banks known as industrial loan companies (ILC).
“He believes strongly that the ILC industry fills a necessary niche in the marketplace and has done so with safety and soundness,” a Bennett spokeswoman said. “This is not a broken system, and therefore does not need to be fixed.”
A top banking regulator said last month that ILCs owned by commercial companies or retailers have good track records and they have a better safety and soundness record than financially owned ILCs.
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Posted by Alex Goldschmidt on Friday, May 11 | 50 comments | Permalink
Kroger Beats Wal-Mart to the Financial Services Punch
Pioneering Kroger offers host of financial services in-store [Financial Times]
Kroger, the largest US supermarket group, has introduced an extended range of financial services - a strategy likely to be emulated by Wal-Mart after vehement political opposition foiled the discounter’s bid for its own banking licence.
Kroger is advertising mortgages, home equity loans and gift cards at its more than 2,000 stores, developing a joint-venture relationship with RBS and its US subsidiaries, which launched the company’s branded MasterCard credit card in 2003.
The new services also include pet insurance and identity-theft products with different partners.
Kroger’s deal with RBS is the most developed of its kind among US retailers. It mirrors the bank’s similar arrangements in the UK with Tesco, the largest UK supermarket. Kroger is also a client of Tesco’s Dunnhumby data-analysis firm, with which it has a loyalty card and points programme backed by its credit card.
Neil Currie, retail analyst at UBS Securities, said Kroger’s strategy had likely sprung from its work with Dunnhumby. “They’ve basically mirrored the Tesco model. . . they’ve seen what Tesco has done, and the spin-off basis . . . in terms of customer loyalty.”
Wal-Mart has been developing its financial services portfolio, introducing low-cost international money transfers, and launching product warranty services. It also offers own-brand credit cards by an arrangement with GE Money. The company has cited the strong performance of its financial services in its earnings calls, without giving details.
In March, it finally withdrew an application for an industrial banking licence that had provoked a storm of opposition from the banking industry and from the company’s union-backed critics.
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Posted by Alex Goldschmidt on Wednesday, May 09 | 13 comments | Permalink
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