For a new generation, a bank may not be one of granite pillars, sculpted lions or teller windows. Rather, it’s marked with a blue roof and yellow asterisk.
It’s Walmart.
Since its attempt to win a banking charter ended in 2007, the Bentonville, Ark.-based big-box retailer has been inching closer to full-blown banking status, recently rolling out a bank-account offer through a partnership with Green Dot and its Utah-based bank.
“We’re trying to provide options,” says Molly Blakeman, a Walmart spokesperson. “We’re listening to our customers each and every day, trying to address unmet needs with innovative, new products.”
For convenience retailers, it’s more competitive heat on a category that may be flickering out. Toledo, Ohio, operator Dan Ridi used to do “extremely well” with financial services, especially check cashing, at his chain of about 50 c-stores.
But many financial services—prepaid reloadable cards, direct deposit and mobile options—are going electronic. In Ridi’s view, the so-called “unbanked” pool is evaporating. And the growing complexity of banking regulations is forcing him to devote staff time just to keep up.
“Because it’s a declining segment, it’s really not worth the time, effort and money to keep up with the regulations,” says Ridi, CEO of Stop & Go Stores. “With the newly purchased [stores] we added, from day one we’ve not done financial services. And most likely, we’ll be removing them from our [remaining] locations.”
Like many others, Ridi may be experiencing a more widespread stagnancy, if not an outright downward spiral, of the category in c-stores. NACS same-store data for check cashing has been on the decline for several years, going from a weighted income average per store per month of $2,776 in 2010 to $402 in 2013. (See sidebar at end of story.) An official with Atlanta-based InComm says check cashing overall has seen a year-over-year decline trend of about 10%.
Still, for Walmart, the continuing push into financial services has merit, observers say. About 40% of adults 18 years or older are unbanked, an increase of 13.2% since 2005, according to Packaged Facts, Rockville, Md. Moreover, the percentage of 18- to 25-year-olds who self-identify as unbanked grew almost 25% in that same time period.
Recession-driven unemployment and wage challenges have probably affected that younger demographic, dampening the need for traditional bank accounts, according to Packaged Facts officials.
In addition, the firm identified a growing trend of alternative banking options building momentum, such as direct deposit, reloadable cards and emailing photographed checks.
But Walmart’s true goals may lie beyond additional income. Some believe that Walmart is big enough to absorb what could well be the unprofitable business of financial services to reach other objectives.
Essentially, Walmart has two basic goals, says economist and financial consultant Mike Moebs, CEO of Moebs Services, Lake Bluff, Ill. First is to reduce interchange fees tied to credit and debit cards, an ongoing concern of which the c-store channel is well aware. And second is to simplify the payment process for the 245 million customers who visit its stores each week.
Walmart paid $3 billion in interchange fees in 2013, according to BI Intelligence, New York. “That’s where they’re coming from,” Moebs says.
CONTINUED: Walmart's Moves
Walmart’s Moves
Fears from both regulatory agencies and financial institutions of Wal-Mart Stores Inc. operating as a bank have subsided since 2007. Concerns of any disruption the retailer could cause for financial processes and competing banks have abated, because the check-cashing and ancillary services it has since begun to offer seem aimed strictly at meeting customer needs vs. completely displacing banks.
Already providing prepaid debit cards, bill payment and money-transfer services, Walmart now offers “starter kits” for $2.95, which customers can use to set up bank accounts. Fees for customers maintaining a minimum balance of $500 are waived; otherwise, users are charged a relatively low $8.95 per month to maintain the account. Other costs include a 3% foreign-transaction fee and out-of-network fees, typically $2.50 for an out-of-network ATM plus any fee the ATM owner may assess.
The result of a partnership with Wal-Mart Stores and Pasadena, Calif.-based Green Dot Corp., GoBank is a checking account from the FDIC-insured Green Dot Bank, based in Provo, Utah.
One of the features Walmart officials tout is that GoBank doesn’t charge overdraft, minimum-balance or monthly fees, other than the fee tied to having a balance below the $500 minimum.
In a press release, Steve Streit, founder and CEO of Green Dot Corp., said a study by independent research firm Bretton Woods, Long Valley, N.J., estimates consumers pay $218 to $314 a year for basic checking accounts.
The GoBank accounts also includes:
▶ No fees on bad checks.
▶ Mobile options including instant person-to-person payments, “pay anyone” bill pay and budgeting tools.
▶ Customers applying for accounts need not undergo a credit-bureau rating check to be eligible.
▶ Access to 42,000 free ATMs.
▶ Early paycheck availability for customers with employers who can notify GoBank of a deposit in advance.
▶ A “fortune teller” feature with attitude. “Remember that time you won the lottery? I don’t either”: If customers spend beyond their budgets, they may receive such a message from the bank, which automatically can cross-check the price of an item with a customer’s planned income and expenses.
▶ A savings capability. Called Money Vault, the service can move money via a customer’s debit MasterCard.
The side story behind GoBank is Green Dot’s competitive stance against New York behemoth American Express, which partnered with Walmart in 2012 to provide a similar banking product called Bluebird. Green Dot actually bought the Bonneville Bank in Provo as a way to offer innovative mobile options, according to the New York-based blog Bank Innovation. In addition to having the savings option, GoBank customers can send money using email, text, social media or PayPal. The account also provides mobile remote deposit capture.
CONTINUED: Other Walmart Services
Other Walmart Services
The big-box retailer has been offering financial services for years from its customer-service counters, and it recently established a MoneyCenter section at most of its stores to highlight the category.
Here’s a list of the financial products and services it provides. Many entice customers to bank online:
▶ Walmart MoneyCard: A reloadable prepaid card that is free if obtained online or $1.88 if bought in a store. Once in hand, a customer pays $3 to reload, with a $20 minimum load if at a store but less if online.
▶ Walmart MoneyCard Plus: A reloadable prepaid card with online options such as bill payment and sending funds to other people. It costs $3 to obtain and $3 to reload, with a $20 minimum load in stores.
▶ Walmart credit card: A credit card good at Walmart stores tied to a 5-cent-per-gallon reward on fuel purchased at Walmart.
▶ Walmart MasterCard: A credit card good at stores where MasterCard is accepted, with fuel rewards included.
▶ Bluebird: The American Express-issued card that has direct deposit, bill pay, ATM access, mobile-check deposit and other features.
▶ Check printing: Provides checks tied to Walmart accounts.
▶ Money transfers: Money can go from one Walmart to another in the United States or internationally via Dallas-based MoneyGram. Depending on the location, prices can start at $4.50 to transfer up to $50, and $9.50 to send up to $900.
▶ Bill payment and money order: Bill-payment fees range from $1 to $3.95 depending on float time, and money orders cost 70 cents.
▶ Check cashing: The fee is $3 for checks up to $1,000, and double that for checks of $1,000 to $5,000.
What Can C-stores Do?
Ridi of Stop & Go says it’s natural for Walmart to expand into financial services. “They’re big enough to have their own staffs [for compliance],” he says. But he’s also concerned about his customers—both in the reaction to his stores not providing the service and for their own financial needs.
“Customers [who] need to do business in areas where there are no banks and no Walmarts: They’ll be [at a] loss,” Ridi says.
Despite Ridi’s take on the category, Moebs believes c-stores have the ability to stay in the game. The answer is to offer a more compelling price point.
While many c-stores today charge as much as $7 to cash a check, he suggests meeting the Walmart fee by charging $3. “There are two benefits,” Moebs says. “They’ll still get a fee and they don’t have to have an armored car show up [as often].”
C-stores also have the advantage of location and convenience, Moebs says. They’re open longer hours and at least today are more accessible, especially in metropolitan areas, than Walmarts (although the big-box retailer has been experimenting with smaller formats in urban areas).
Moebs suggests further that c-stores or an association such as NACS could band together to partner with or even create their own bank. Such a solution would allow for services to their customers while also cutting interchange fees from credit and debit cards.
Yet another option is a third-party provider. Ken Upcraft, president of Pay-Center 1, Woodland Park, Colo., offers such a kiosk. The financial center creates a “virtual bank” by offering customers ATM capabilities, bill payment and payday loans. The device accepts bills and dispenses cash.
Having such a kiosk also takes the complexity and training away from the cashier and cuts down on lines at the register, says Upcraft, who sees the industry’s ubiquity, fuel offer and in-and-out accessibility as distinct advantages.
“People go to buy $100 in groceries once or twice a month at Walmart,” Upcraft says. “But for many, it’s a daily trip to the c-store for cigarettes, gas or soda.”
A Declining Category
Financial services appear to be a category in decline among c-stores. NACS SOI data going back four years shows either a stagnancy or a drop in same-store income in many services.
| Income category | 2010 | 2011 | 2012 | 2013 |
| ATM income | $750 | $711 | $720 | $724 |
| Check cashing | $2,776 | $1,105 | $1,086 | $402 |
| Money orders | $380 | $132 | $90 | $104 |
| Prepaid telecom | $224 | $195 | $202 | $176 |
| Other prepaid | $49 | $73 | $84 | $84 |
Note: Comparing same-firm data over 4 years may not comply with NACS’ sampling science, but the data alludes to declines. No chains of more than 500 stores were in the 2013 check-cashing average, causing the drop.
Source: NACS State of the Industry reports 2010-2013
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