Wal-Mart reaches out to the unbanked

The retail giant could give banks a run for their money.

By Jonathan Berr Oct 8, 2012 11:46AM
Wal-Mart store in Secaucus, New Jersey, Jin Lee, Bloomberg via Getty ImagesWal-Mart (WMT ), the world's largest retailer, and American Express (AXP) announced plans Tuesday to offer alternatives to conventional bank accounts, whose escalating fees are souring increasing numbers of Americans on the financial services industry.  

Customers of the new Bluebird service will be able to use many of the same features as conventional bank account holders, such as withdrawing cash from ATMs, paying bills electronically and making deposits via smartphone. But they won't need to meet a minimum balance or pay monthly, annual or overdraft fees. Bluebird, which began as a pilot last year, is set to launch next week.

The service is Wal-Mart's latest foray into financial services for the so-called unbanked or underbanked. Wal-Mart has financial services locations, called MoneyCenters, in more than 1,000 stores that offer electronic bill paying, check cashing and tax-preparation services. 

The financial services industry has bitterly fought Wal-Mart's attempts in recent years to get a banking license. Whether Bluebird will restart that battle remains to be seen. The service, though, may prompt banks to pay attention to customers who often get bad bank service or none at all.

"Anything that provides clear, transparent pricing for financial services is a good thing," Ellen Schlomer, the executive vice president of the Committee for Responsible Lending, said in an interview, adding that she hasn't had time to study Bluebird in depth.

Shares of Wal-Mart have gained about 26% this year. The company's motives for bolstering its financial services offerings are not altruistic. In theory, if Wal-Mart can make it easier for consumers to manage their money, they will spend more at the retailer. The timing of the announcement, at the start of the holiday shopping season, is no coincidence. Wal-Mart already has slashed fees for its layaway plans. Bluebird, though, will help the retailer all year round.

According to the FDIC, about 10 million U.S. households are unbanked and 24 million are underbanked. Wal-Mart also can afford to treat banking consumers better than traditional rivals because it is not dependent on fees for its bottom line. That is good news for consumers.

High fees are souring many consumers on traditional banks. Data cited by Wal-Mart show that consumers now pay an average of $259 per year for a basic checking account. CRL estimates that the industry earns $25 billion from overdraft fees. Consumers are paying more fees because of changes in banking practices, which include tactics like deducting the largest payments from accounts first, according to Schlomer.

Jonathan Berr is long Wal-Mart. Follow him on Twitter@jdberr.
 

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380Comments
Oct 8, 2012 4:54PM
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Nearly everyone seems to have a negative view of Wal-Mart.  In reality, it is one of the few stores that cater to the needs and desires of its clientele.  The secret of success is to find a need and then fill that need and people will flock to you.  I used to be one who shunned “Wally World” but when I totaled the savings by shopping at Wal-Mart it was a no brainer.  Their brand of food products are equally as good or better than the Branded brands.  My only regret is not shopping there sooner. 

 

I think their move into the financial market is well timed and damned smart!  Of course if your one of the “In crowd” that feels privileged to be charged $4 to access your own money using a 24hr teller so the bank does not have to pay a person to get that money for you.  You are actually saving the bank money by using the 24hr teller and they thank you by stealing your money.  Paying a $4 fee for the $60 in cash actually cost you 2,555%.   Its not absurd it’s the truth, go ahead do the math yourself.

 

Maybe it will take Wal-Mart to convince the banking industry that charging 3-5% on their money while paying you .02% on yours is blatant thievery.  I say all the more power to Wal-Mart may the thieves in the banking industry cower in fear and shrivel up and die or get right.  Remember it is your money that allows banks to operate, without it they can do nothing.

Oct 8, 2012 5:15PM
Oct 8, 2012 2:13PM
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Banks have gone from friendly neighborhood places to cold institutions whose only interest is to grind every dime they can out of every account.  Never got an overdraft fee?  OK we'll just charge you a monthly fee for keeping your checking account. Oh and if you want to talk toa live teller, that's $1.50, We prefer you use the ATM where we also charge you $1.50. It's time somebody started a bank that was service based rather than fee based.
Oct 8, 2012 1:55PM
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Good.... I don't care how much the Waltons or anyone else makes ... competition will always drive costs (fees) down. You think the big banks need protection from Wal-Mart ?? we need protection from the big banks ... and this is one way to do it without 'regulations' written by politicians in the big banks pockets.
Oct 8, 2012 5:02PM
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I love Wal-mart.  I just had my oil change and they inspected my car. They found out that i needed a new battery, they saved me a tow job.

 

I can't wait till they start selling new cars, like the $6000.00 ones from China, and buy it online and delivered to my local Store.

 

I will able to buy  food, automobile, deposit my money in my Wal-Mart bank account, a gun, candy bars and plants for my Garden.

 

All i need now is a Hospital in Wal-Mart , maybe they can cure my Mental Illness i get every time i go in the store.

 

 

Oct 8, 2012 1:47PM
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Don't much care for Wal-Mart, but I do hope they slash the big banks in half.  The big National Banks treat their customers like pawns on a chess board, and I cannot tolerate them.  They have become obnoxious through their wanton fees.  Banks have taken over the Stock Brokerage industry, the Insurance Industry and Credit Card industry and will stop at nothing.  I hope they get taken to the cleaners by Wal-Mart......it couldn't happen to a better sector of the business world.
Oct 8, 2012 3:29PM
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This is the Bank of America way of doing business......give the customer a checking account along with a debit card.......if a customer has a $200 balance and makes a $150 debit POS purchase at 1pm they have a $50 balance left..$20 purchase at 3pm leaves $30 balance $15 purchase at 3:20pm leaves $15 balance. Bank closes at 4pm. $15.07 purchase at 4:15 pm overdraws the account by a whopping .07cents. Transactions updated electronically at 9pm. Transactions update in order of amount by processing the largest one first so instead of having ONE $35 overdraft fee your balance is shown to be - .07cents so now you get charged $35 for each of your six transactions for a whopping total of $210 dollars because you overdrew your account by .07 cents on you last transaction of the day even though the time of these transaction was transmitted to the bank when you made them. the Bank will tell you that there is nothing they can do to prevent this and that you must pay the overdraft fees....Recently a class action lawsuit was brought against BOA for this procedure and rather than admitting doing anything wrong and letting it go to trial BOA paid out 440 MILLION to settle without admitting any wrongdoing (just a MISTAKE on their part) The bad news is they still process transactions in the same manner....I know. I look at my bank statements every day on-line and while I do NOT overdraw my account, the transactions are still processed in order from largest first to smallest with no regard to the time they were made (at the Point Of Sale = POS) ........MOST FRAUDULENT BANK IN US HISTORY. Other large banks follow this protocal also...check your account on-line to see if yours does .....you might be surprised!!!!

 

If Wal-Mart can do better than this let them Have At It!!!!!!  Every time they open a new store they do so with it being paid for in full, up front, and completely debt free.......don't think they are  going to run out of money.......if it starts to go south they will bail long before they ask the Gov't for a dime to help them...I've always thought WM shopuld have their own Banking Charter but if this happens Jim Walton would have to find new owners for Arvest Bank as his interest in them might cause a conflict of interest unless they chose to merge the two (talk about a bank that would be "too big to fail")   I Love the way Arvest does business ....I have had a free checking account there for over three years and have never been charged one penny in maintenance fees (and I don't keep much money in it either).....I have never walked into any of their numerous branches in Northwest Arkansas where I also live and not had at least one person (and usually more than one) welcome me when I walk in and then tell me to have a nice day when I leave) and they almost always have a teller at each window in the lobby and the drive in......quick and efficient and they all speak English (and Spanish when necessary)

 

Fortunately I have closed four out of five accounts that I once had at BOA simply because I never waited less than 15 minutes to even see a teller if I went to the lobby for a transaction....min. of 30 mins to see a mgr for any other business and once sat down at a mgrs desk only to see a three sided sign on his desk that was in Spanish....only problem was that there was NO ENGLISH Translation on it.  When I asked him what it said his reply was "I have no idea ....I don't speak Spanish"  ......no joking ....and this was in a city just south of Bentonville Arkansas (Not in Mexico)............GO WITH WAL-MART if they choose to take on a Banking Venture.....NO WAY could they do worse that Crank of  America....no pun intended there.

Oct 8, 2012 1:52PM
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I think competition will put banks in check far faster than a whole horde of government regulations. Lobbyists have done a pretty good job in making sure that the teeth are pulled on most meaningful regulation coming out of Washington.

Go for it Wally World....it would be nice to see bankers sweat for a change.
Oct 8, 2012 1:49PM
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Wal-Mart offering financial banking services will be a boom for the everyday consumer and it will help put a thorn in the butts of the greedy and immoral American banks who continuously gouge the people. 
Oct 8, 2012 2:29PM
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I don't use banks, I have been with our Credit Union over 15 years and have been very happy with them.  They have been there for me when ever I needed them.  Last year I had an incident where my account was totally cleaned out, checking, savings, and overdraft.  All gone.  Zero balances on all.  I about had a heart attack.  I called the bank at 8am, cause that is when my CU opens, and thru my tears asked them where was all my money.  After a short research they discovered my account had been cleaned out by someone in Europe, buying airline tickets.  I was told to come directly to the CU and they would handle everything for me.  By the time I got there, they had a brand new card for me, all the monies had been returned to my account, and my heart was back in good shape.  I cannot say a Bank would have been that fast. 

 

Just suggesting if your not happy with your bank check out your Credit Union. 

Oct 8, 2012 1:37PM
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To the banking industry, You brought it on yourselves.
Oct 8, 2012 1:11PM
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This is good competitive capitalism at it's best. The consumer will be the winner.
Oct 8, 2012 2:33PM
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Not a WAL-MART fan but sick of banks screwing us on fees.

 

Hope Wal-Mart does well in banking

Oct 8, 2012 4:57PM
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More over banks a service that will help the finacially challenged has stepped in to aid those people whom you have overlooked for decades.........and now you want their business! Too bad you didn't want it before. Walmart actually cashes my salary without a hassle when the bank it is drawn on give me hassle everytime because I am not a signer on the account..........I have a financial director for that.

My bank is 45 minutes away, Our company bank is 12 minutes away, and Walmart is 2 minutes away.Thank you Walmart for your money centers!!!!!

Oct 8, 2012 1:24PM
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What a GREAT idea!!  Shoppers of Walmart are the struggling in our country... those of which Banks have taken advantage of for DECADES!!!!  It's time a company came in and realized that if you help meet a customers needs, they will repay you with LOYALTY.  Too many companies think that they are doing consumers a favor, instead of the customer favoring their company.
Oct 8, 2012 4:44PM
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Great news.Banks are getting out of control with their fees and costs. I hope Walmart forces them to cut their fees and charges for everything.
Oct 8, 2012 2:24PM
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Wal-Mart has proven that it can handle money and the banks have proven that they are greedy. The days of service are gone.
Oct 8, 2012 1:16PM
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Ditch the banks, join a Credit Union. They are doing everything right now that Walmart is proposing.
Oct 8, 2012 4:32PM
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GOOD! I hope they kick Bank of America's azz! And they'll probably be open on Sunday!
Oct 8, 2012 1:50PM
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The bottom line is that we have created banks that are too big to fail. We need an alternative. This may not be for everyone but it will fill a need for those who cannot afford the expense that traditional banks charge you for accessing your money.

When we the taxpayers bailed out the "too big to fail" banks, it was only a matter of time after they paid back the loan that they would figure a way to get that money back with fees. It wasn't if, but only when.

To big to fail means monopoly. Break them up into smaller banks that actually serve the customer. We are all just an account number, not people.

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