The nation’s biggest retailer has rolled out a cash-handling service that the financial world regards as another foray into banking. That’s a bit of a misnomer. While Walmart services inevitably take a bite out of someone else’s business (in this case, including its existing partner, MoneyGram), its intent is not to reinvent the bank. Rather, the retail giant is aiming to keep customers in its stores longer by offering its flavor of person-to-person payments, serving a market that is growing explosively, fueled by the advent of smartphone apps that facilitate such transfers. A study by Mercator Advisor Group revealed that 14 percent of consumers sent money transfers in 2013, up from 9 percent in 2012.
Walmart-2-Walmart allows customers to send and receive up to $50 for $4.50, and up to $900 for $9.50 to any of its 4,000 stores in the U.S. and Puerto Rico. As to be expected, these prices are lower than similar services offered by others in the p-2-p business. Its advantage to the customer: The service is offered where they already do their shopping. And it’s targeting a demographic that’s far larger than many anticipated – the unbanked customer. A quick snapshot says 25 percent of American households are unbanked. Add to that the underbanked, and a third of the population are candidates for an efficiently fragmented money service – once again, abetted by mobile phone technology.
When Walmart rolled out its Bluebird prepaid card in 2012, in partnership with American Express, it carried no minimum balance and rock-bottom fees. It does not, however, have FDIC insurance. That may not be a priority for the people who use it and who benefit from the cost savings over alternative cards.
Walmart won’t replace banks and credit unions in terms of establishing credit and making loans. The retailer sought a bank charter in 2007, but withdrew its application after opposition from unions and the financial industry. Chalk one up for the turf protectors in that fight, but technology marches on. Lending circles and other socially-based financial structures are springing up parallel to the traditional banking and credit union systems.
There are bound to be missteps as the new services come of age, but the sheer mass of potential customers who would self-select away from both usurious non-bank financial services and traditional banks and credit unions are creating a customer mass. There is power in numbers, and no one knows that better than Walmart.
