Walmart's MoneyCenters and Other Financial Services
Walmart, the biggest retailer in the world, has made a major move into financial services. Some key ventures include:
- MoneyCenters in 1,800 of its 4,300 stores in the United States
- Small business loans through Sam's Club stores
- Banking licenses in both Canada and Mexico
- Banco Walmart branches in 263 stores in 31 Mexican cities
- A major push for a Walmart Rewards MasterCard in Canada
These are variations on two longstanding themes. First, supermarkets have a long history of having existing banks, mainly small local savings banks and thrifts, rent space within their premises for small branches catering to shoppers, usually with extended hours versus those in the typical branch. Meanwhile, Walmart happens to be a major landlord for offices of national tax preparation firms H&R Block and Jackson Hewitt. Second, in various other national markets (notably the United Kingdom), large supermarket chains such as Tesco have a history of setting up banking subsidiaries of their own to operate on their retail premises.
Some observers have noted that supermarkets tend to be much more serious about delivering excellent customer service than banks, which are are more obvious in subordinating service to profit (Special Report on International Banking, The Economist, May 16, 2009). They also point out that supermarkets have a competitive advantage in their low cost of customer acquisition, due to the large number of shoppers that they already serve daily.
Walmart MoneyCenters offer these core services:
- Check cashing (being rolled out to all U.S. stores)
- Money transfers
- Money orders
- Bill payment
- Prepaid debit cards
- Credit cards
- Check printing (online orders only)
Check Cashing Fees
Walmart is looking to serve lower income individuals who do not have banking relationships. Walmart MoneyCenters charge a flat $3.00 to cash payroll, government and tax (but not personal) checks worth $1,000 or less, and a flat $6.00 for checks above $1,000, to a maximum of $5,000. Check cashing services, contrast, typically charge commissions ranging from 2% on government checks to 4% on payroll checks, per the Lex Column in the June 23, 2010 issue of the Financial Times.
The Unbanked and Underbanked Market
The market potential for Walmart is large, since the FDIC estimates that about 17 million U.S. households, or 7.7% of the total, are unbanked (i.e., with no bank accounts or banking relationships), and roughly 40 million households, or 18%, are underbanked. A 2008 study by market research consulting firm Aite found that Walmart already had 11% of the check cashing market by that time ("Banks vs. Wal-Mart: Round Two" in Bloomberg Businessweek, August 15, 2011). Indeed, Walmart also offers free tax refunds to serve this part of its customer base.
Green Dot Stake
Walmart also has a small equity stake of about 1% in Green Dot, a payments processor that supports the prepaid and reloadable Walmart MoneyCards, an alternative for low income customers who do not have bank accounts. Meanwhile, Green Dot has acquired Bonneville Bank, a small commercial bank in Utah. While this might provide a means for Walmart to add full banking services in the U.S., the company stopped pursuing a banking license in 2007, after facing strong opposition from political opponents and banks fearing competition.
Lobbyists for the banking industry are arguing that Walmart MoneyCenters should be regulated by the Consumer Financial Protection Bureau created by the Dodd-Frank bill (also in Bloomberg Businessweek, August 15, 2011).
Small Business Loans
Members of Walmart's Sam's Club stores can obtain small business and start up business loans of $5,000 to $25,000 through an online application process with discounted fees. Superior Financial Group, an independent issuer Small Business Administration (SBA) insured loans, is the issuer of these loans, not Walmart. Walmart launched the program in 2010, in response to a 2009 survey in which 15% of Sam's Club business members indicated that they had been denied credit.
Walmart or Wal-Mart
The parent corporation is still legally the hyphenated Wal-Mart Stores, Inc. However, the current corporate logo and trademark is a single word without punctuation, Walmart. Some publications, like The Wall Street Journal and Bloomberg Businessweek use Wal-Mart. Others, like the Financial Times follow the lead of the company's own website, which uses Walmart, as does the new signage on U.S. stores. Adding to the confusion, many of the company's trucks still bear the hyphenated Wal-Mart name, and give the company's website as the hyphenated wal-mart.com, even though the web address has since been changed to walmart.com, without the hyphen.