Wednesday, September 11, 2013

Going Mainstream: Underbanked are Becoming Alternatively Banked

There's a movement afoot to deep-six labels like "unbanked" and "underbanked" in favor of a more inclusive moniker, like alternatively banked. It's easy to see why: hardly a week passes when some alternative to traditional bank checking accounts gets introduced. These typically are tied to reloadable prepaid debit cards, and increasingly, mobile banking technologies. And many are functionally indistinguishable from checking accounts.

This week's news: Kmart is making a new play for the unbanked and the federal Department of Health and Human Services (HHS) has issued a ruling under Obamacare requiring health plans to accept prepaid debit cards.

An estimated 8.5 million Americans without health insurance would have a tough time qualify for tax credits toward health insurance using the new, online marketplaces created under Obamacare if plan providers banned certain types of payments such as prepaid cards and money orders. Prepaid cards have become immensely popular with underbanked Americans, as well as the banking public, and often seem indistinguishable from debit-card enabled checking accounts.

Now a new ruling issued by HHS requires insurers to accept just about every generally accepted method of payment from enrollees, except cash. The ruling came at the urging of consumer groups and tax preparers who do a lot of business with the financially underserved.

Attention Kmart Shoppers

Kmart, a wholly-owned subsidiary of Sears Holdings Corporation,is not a stranger to the underbanked. It sells re-loadable prepaid cards and houses Western Union money transfer kiosks and ATMs in many of its locations. Plus, Kmart + Sears are the only major retailers offering customer layaway plans. Most recently, Kmart expanded its layaway program to include on-line as well as in-store purchases.

On Monday, Kmart announced a new cash-cashing service for members of its rewards program. For "a low fee of $3 or less" members can now cash government-issued checks for amounts up to $2,000, payroll checks for amounts up to $1,500 and personal checks for up to $400, the company said. The pricing is pretty competitive with Walmart.

This is not the first foray by Sears into the world of financial services. Thirty years ago the then retailing giant made a play for becoming a financial services conglomerate: it introduced the Discover Card, owned a brokerage house and even a credit card bank. Eventually Sears shed those units. Now, I can't help but wonder, are in-store financial services counters a next step for Kmart? With Sears behind the name, Kmart could pose a challenge to Walmart's premier position as banker to America's un/under-banked.


  1. stability no where! this is terrible news! I do not even know what to do next

  2. Going mainstream is always a hard choice for me. Recently everybody started using Superior papers and I can't choose whether it is a decent service.

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  4. The traditional bank accounts require some kind of alternative to meet the needs of all customers. Some institutions cannot influence the situation.