WalMart Wants to Bank the Underserved

June 20, 2011

Just a few years ago, WalMart, the mega-retailer, was hot to own a bank - attempting, unsuccessfully, to purchase a small bank in Utah. The scuttlebutt at the time was that owning a bank would allow WalMart to shave costs, especially those associated with accepting and processing credit and debit cards and checks. Presumably, owning a bank also would create opportunities for WalMart to issue credit and debit cards to its shoppers.

WalMart was forced to shelve its aspirations of owning a bank after bankers and lawmakers balked. But not its aspirations of being a bank. WalMart today offers an array of financial services through staffed MoneyCenters located in about a third of its U.S. stores. And this week WalMart is slated to begin opening MoneyCenter kiosks in stores that don't have full-service MoneyCenter counters.

A report last week in the Las Vegas Review-Journal quotes a WalMart spokesperson explaining that a trial roll out of the kiosk concept to about 1,900 stores, including 20 in and around Las Vegas.

WalMart is already a top seller of prepaid debit cards, through MoneyCenters and at store check outs. The retailer also holds an ownership interest in the prepaid card company Green Dot.

WalMart makes no bones about it's desire to become banker to America's unbanked and underserved - the estimated 24 million households that have either no bank accounts (about 9 million households by the FDIC's count) or do but also use nonbank providers, like check cashing houses and payday lenders.

Services available at WalMart MoneyCenter counters in addition to prepaid debit cards include: check cashing, electronic bill payments, gift cards, money orders and wire transfers. Online WalMart offers an extensive array of financial education and management tools designed for the underserved.

Micro-loans, Online, Through Sam's Club

Further evidencing efforts by WalMart to bank the underserved, the company supports micro-lending through its Sam' Club warehouse chain. Small business owners who are Sam's Club members now have access to SBA-backed loan amounts ranging from $5,000 to $25,000 through a partnership Sam's Club has with Superior Financial Group.

One of the enticements Sam's Club offers borrowers is a 20% discount on loan fees. Working through Superior, the retailer also makes available to small business owners an array of free and low-cost business education and management tools.

The online micro-loan program was launched last year by Sam's Club after customer surveys indicating that nearly 15% of the chain's business members had been denied business loans to run their business in November 2009, up from 12% seven months earlier, the company said in announcing the program.

Sam's Club is no stranger to financial services. The warehouse chain has for many years been a reseller of credit card processing (merchant banking) services.

Americans purchase $75 billion a year in money orders from non-banks

_{-Federal Reserve}