Bankless Wal-Mart Seeks Unbanked Consumers

BENTONVILLE, Ark. In counterpoint to its recent overtures to a more upscale clientele, Wal-Mart Stores will aggressively roll out a financial services program aimed primarily at lower-income customers. The announcement last week that it will install 1,000 MoneyCenter departments and offer a co-branded prepaid debit card follows the company's withdrawal in March of its application to create a banking

BENTONVILLE, Ark. — In counterpoint to its recent overtures to a more upscale clientele, Wal-Mart Stores will aggressively roll out a financial services program aimed primarily at lower-income customers.

The announcement last week that it will install 1,000 MoneyCenter departments and offer a co-branded prepaid debit card follows the company's withdrawal in March of its application to create a banking entity.

At the time, Wal-Mart had said that it wanted the bank — chartered as an Industrial Loan Co. — to process credit and debit card interchange fees, but all its moves since then have been aimed squarely at the consumer banking market. Wal-Mart executives sidestepped questions about what the retailer is now doing about interchange fees.

This shows the company's true colors, said Ron Ence, vice president, congressional relations, Independent Community Bankers of America, Washington. “What they want to do is cherry-pick some of the customers that traditional banks have, and capture a portion of their traditional market.”

Wal-Mart's financial offerings seek to meet the needs of the “unbanked” and “underbanked,” said Jane Thompson, president, Wal-Mart Financial Services. She said 28 million people in the U.S. are “unbanked,” without any kind of a relationship to a financial institution, while 45 million are “underbanked,” with accounts established that they don't use regularly. Banks have little interest in such consumers, but “these are the people we see every day in our stores,” Thompson said.

“We think this is groundbreaking, and a game-changer in the industry, and also a life-changer for many of these customers,” she said.

This approach reflects Wal-Mart's heritage of going after populations other retailers ignored, said Art Turock, sales growth strategist, Art Turock & Associates, Kirkland, Wash. “This is more typical of Wal-Mart, trying to find some less or minimally contested customer segments, and the unbanked and underbanked fit that designation quite well,” he said.

“Most banks and financial institutions don't really target this type of customer,” Turock said. Meanwhile, it meets the retailer's immediate need to draw more people into the stores while increasing the sales per trip, he said.

Wal-Mart is building its financial services program on current offerings, like check cashing, money orders, money transfers and a Discover credit card in partnership with General Electric Credit, Rochester, N.Y. The MoneyCenters consolidate these products, and provide a place for marketing the new Wal-Mart MoneyCard — a prepaid debit card offered in partnership with GE; Visa, Foster City, Calif.; and prepaid card provider Green Dot, Los Angeles — along with future services.

Thompson said Wal-Mart is now working on four such offerings that she would not provide details on, but noted that many future services will be based on the MoneyCard. The card is being rolled out to about 1,300 stores this month and another 1,300 next month, and will be in most Wal-Mart stores by the end of the year.

There are now 225 MoneyCenters, set to grow to 450 by the end of this year and 1,000 by the end of next year. Initially, locations are being determined by the demographics of the store and shoppers' likelihood of using the services. A new design for the centers was introduced in Atlanta last week, Thompson noted.