Banking on the Unbanked'

Wal-Mart a late mover, but touting price for new financial services

Published in CSP Daily News

BENTONVILLE, Ark. -- For retailers targeting the so-called unbanked population with money orders and check-cashing services, the Wal-Mart elephant has just entered the room. The mass merchant has formally focused its retailing might on financial services inclusive of check cashing, money orders, bill payment and money transfers, as recently reported in CSP Daily News.

Though the move comes as no surprise, its pending execution can have a negative impact on retailers such as convenience stores with competing offers. Wal-Mart has shown that they fully [image-nocss] intend to dominate in yet another sector, said Keith Brand, president, Tefisto Partners, Tempe, Ariz. I think that any c-store that has not already aggressively launched a financial services offering is now even more threatened by Wal-Mart.

Executives for the big-box retailer are banking on a trademark strategy of convenience and price to draw in new business, publicly declaring savings in the range of $40 per month in comparison to existing choices.

Of course, the target unbanked or underbanked demographic typically includes people who lack a formal relationship with a bank, conducting personal business in cash without the use of a checking account or online services.

Many of our customers are paying too much, traveling too far and not being well served, said Jane Thompson, president of Wal-Mart financial services, in a press release. But they still need to pay their bills, cash their checks and transfer money.

Last year, Wal-Mart customers who used its financial services saved an average of $450 per year or almost $40 per month, the company said. The chain currently has 225 of its MoneyCenter locations open, with that number expected to grow to 450 by the end of the yearand then to 1,000 by 2008, the company said.

So has the boat sailed for c-store retailers with regards to the unbanked? C-stores can still win in this space with convenience and focus, Brand said.

Brand, whose firm specializes in the stored-value business, said chains such as 7-Eleven and Circle K realized years ago that financial services were a core category. These companies have built up loyal customer bases with compelling offerings, he said, and as a result, are defending their turf against late-movers like Wal-Mart.

And don't think the threat stops a there. Recent initiatives by Wal-Mart, according to Brand, will stimulate the entire grocery sector to become more aggressive with financial services, with the inclusion of London-based Tesco. Watch for Tesco to be aggressive in this space in their new stores, he said.