Can Wal-Mart Cash In On Financial Services?

Though still waiting to hear word on its applications to obtain an industrial-bank charter in Utah ? not bank branches, mind you; certainly not bank branches — and federal deposit insurance, that hasn?t stopped WalMart from making quite a splash in the financial-services sector, competing with banks, check cashers, postal services, and money transfer companies.

Of course, this makes the banks, check cashers, postal services, and money transfer companies deeply uncomfortable. WalMart doesn’t have a reputation for playing well or fair with others.

In a story in the Wall Street Journal, WalMart said it averages roughly 1.5 to 2 million money-services transactions a week ? everything from check cashing to bill paying to money orders. WalMart?s primary market is the ?underbanked? ? low-income customers who don?t have relationships with traditional banks.

As it has with almost everything else it does, WalMart?s prices for financial services are strikingly lower than many of its competitors. For instance, while most check-cashing establishments charge up to 3% of the check?s face value, WalMart only charges a maximum of $3.

Much like its proposed banking charter ? frowned upon by most industry watchdogs and analysts for the unfair competition WalMart brings to the party ? WalMart?s courting of the ?underbanked? has drawn some pretty stiff opposition. And while WalMart can be difficult to support, some of the arguments against its plans to service the underbanked segment of the financial-services sector are pretty ridiculous. Take for instance Bruce Spitzer?s challenge. Spitzer is a spokesman for the Massachusetts Bankers Association, which represents 210 banks in the state and has been one of the loudest critics of WalMart: ?Wal-Mart wants people to cash their checks in their stores so they can then make impulse purchases in the store. We don?t think this is a good service for consumers.?

Spitzer, of course, did not offer any solutions for where the underbanked could go, though the ?anywhere but WalMart? seemed to be implied.

The Wall Street Journal carries the full story for subscribers. Click here.