The Bank of Wal-Mart?

Wal-Mart failed to gain approval for a bank. But the store plans to open 1,000 "money centers" in its US stores by the end of next year. Customers will be able to buy money orders, cash checks and pay bills at a lower price. Pre-paid Visa debt cards, aimed at low-income consumers, will also be available for an initial cost of $8.95 with a $4.95 monthly maintenance fee.

The move by Wal-Mart is seen as a first step into the banking world. The money center services and pre-paid cards are considered "foundational products" that will be built upon. Some see the retailer eventually offering mortgages and home equity loans.

Analysts said there is reason to believe Wal-Mart will lower the cost of banking in the US. According to company executives the store's financial services saved customers $245 million last year and cut the cost of check cashing 50 percent.

The Collection of Pennies blog says Wal-Marts' ubiquity should bring many customers to its new financial offerings and now could be a good time to buy the stock:

Wal-Mart is a master cutting costs out of their products, which could allow them to be a low cost provider in the banking industry. The fact that Wal-Mart has locations all over the world positions them to reach a greater consumer base. . . If you love Wal-Mart or hate them you can’t ignore their success. With a newly added financial product line Wal-Mart looks like a worthwhile buy.

Convenience is king says The New Business World blog:

Finally, the convenience of having banking and shopping together cannot be matched. When you walk into Wal-Mart with your check you can cash it, put it on your credit card, pay your bills, pick up grocery’s and buy your kids soccer shorts. One-stop shopping has its advantages where everyone is busy and visiting another store might mean a 20 minute drive.

CNY Circus asks if such convenience could also be a trap:

“The Bank of Wal-Mart” could be a great convenience for the store chain’s 36 million customers who have no bank accounts. They can transfer their paychecks directly onto pre-paid debit cards and very likely spend big chunks of their low incomes at the store. As for credit cards and loans, what interest rates will Wal-Mart charge these customers? Could putting their financial lives in the retailer’s hands be a trap, as well as a convenience?

Local bankers and others will be watching with concern, as Wal-Mart quadruples the non-branches of its non-banks and gives people who need to watch every penny, incentives to sign up.

-Dippold

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