Big-box Banking: Wal-Mart unveils MoneyCenter program

The world’s largest retailer, based in Bentonville, Ark., announced June 20 that it will open MoneyCenters in 450 of its nearly 4,000 locations by the end of this year.

One of those 450 MoneyCenters will be in Joplin, but Wal-Mart officials said Springfield and its surrounding communities are not on the list this year.

Wal-Mart plans to have 1,000 MoneyCenters by the end of 2008. Though it is not yet known whether any of those MoneyCenters will be in the Springfield area, some of the services, which include check cashing, money orders, bill payment and money transfers, already are available locally. Among the new services are prepaid reloadable Wal-Mart Visa MoneyCards, which can be used anywhere Visa is accepted.

“We are targeting the unbanked population by providing them with products and services at low prices,” said Alfredo Padilla, Wal-Mart senior communications manager.

The MoneyCenters will be open seven days a week.

The move comes months after the retail giant withdrew its application for an industrial loan company charter, which would have allowed the company to process its own debit, credit card and check transactions.

Critics feared that an ILC charter would allow Wal-Mart to expand into community banking, creating additional competition for smaller, locally owned banks, a charge the company denied.

“At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested,” said Jane Thompson, president of Wal-Mart financial services, in a March news release. “We simply sought to reduce credit and debit card transaction costs.”

No worries?

Shaun Burke, president and CEO of Guaranty Bank, which operates a branch inside the Nixa Wal-Mart Supercenter at 1102 N. Massey Blvd., said he’s not worried about the effect MoneyCenters would have in the Springfield-area banking market.

“The services that they’ve designed are really not designed for customers that currently bank with financial institutions,” Burke said. “They’re for people who primarily are cashing paychecks and operating with cash.”

Burke added that the main purpose of having a branch inside the store is not to compete with the retailer’s services but to offer convenience for Guaranty Bank customers.

Bank Midwest has 22 branches inside Wal-Mart stores, including three in Springfield. Gerald Clemen, vice president of in-store banking, said that overall, Bank Midwest is “thrilled” with the bank-related services Wal-Mart provides, as well as the retailer’s efforts to work closely with the banks in the markets it serves. Bank Midwest’s holding company, Dickinson Financial Corp., has a presence in more than 60 Wal-Mart stores.

“The goal hopefully is to get those people more comfortable with banking products,” Clemen said.

He also noted that many of the services Wal-Mart is touting, including check cashing, are not new; the MoneyCenter idea is just a way to repackage some of those services in a central location within Wal-Mart stores.

Wal-Mart spokesman Padilla said Money-

Centers and independent in-store banks could co-exist.

“The idea was to let our customers know about some of the other mainstream products that the (in-store) banks offer, so they’ll be able to use our products as well,” Padilla said. “We value our bank partnerships in our stores, and we believe they offer excellent services to our customers looking for traditional banking services.”

Burke and Clemen also noted the additional fees that Wal-Mart will charge for its services. For example, customers pay $8.94 to purchase a Visa MoneyCard, plus a monthly maintenance fee of $4.94 and an additional $4.64 to reload the card.

Reason for concern?

Despite Wal-Mart’s assertion that it is not using the MoneyCenters to enter the banking market and compete with traditional banks, Missouri Bankers Association will be keeping an eye on the retailer’s foray into banking services.

MBA Executive Vice President Bill Ratliff said that while it’s too early to tell exactly what the effect will be, Wal-Mart’s MoneyCenter plans are cause for concern.

“They’ve had their eyes on the financial services sector for quite some time,” Ratliff said. “This latest addition is getting around the traditional banking regulators, Congress, the banking lobby and other groups. It’s a different approach, but it could have, over a long period, a significant impact.”

Ratliff also pointed out that people who use the rechargeable Wal-Mart debit cards, not only will incur the additional costs, but they also won’t be able to use them to build credit, as can be done with traditional credit cards.

“You’re basically putting your money in Wal-Mart and then spending it, at significant costs,” Ratliff said. “Many people may be better off going with their local bank.”

Guaranty Bank’s Burke agrees that the MoneyCenters are not targeting the same customers as the in-store independent banks, but that doesn’t mean he’s not paying attention to Wal-Mart’s banking aspirations.

“We know that Wal-Mart continues to try and get into the banking realm. … If they’re able to do that, because of their size and power, they’ll be a threat,” he said. “But locally, we don’t see this venture being competitive with our services.”

Thompson, who noted in the release that Wal-Mart’s financial services save customers more than $245 million a year, maintains that it’s customer service, rather than banking competition, that’s driving the retailer’s efforts to enhance its offerings.

Focus on customers also was behind Wal-Mart’s decision to withdraw its ILC application, officials said, based on the fact that the approval process would likely take years.

“We fully intend to continue to introduce new products and services that champion those who deserve convenient, lower priced financial services,” Thompson said.