BENTONVILLE, Ark. -
The move comes as dozens of credit unions are opening in-store branches in Wal-Marts or planning to do so over the next few years. Service CU in New Hampshire recently opened its fifth of seven planned Wal-Mart branches; and AllSouth FCU of Ft. Jackson, S.C., plans to open four in-store Wal-Mart branches by the end of this year. Other credit unions that recently opened Wal-Mart branches are: Granite CU, Desert Schools FCU, Members CU and Members Alliance CU. Just last week, First Community CU opened a branch in the new Wal-Mart Supercenter in Collinsville, Mo.
In all, there are more than 300 credit unions and banks operating 1,300 Wal-Mart branches, about a fourth of the total number of Wal-Mart stores. About 135 of the branches are run by credit unions.
The MoneyCenters will be aimed at the growing unbanked and underbanked market, the company said. Wal-Mart already operates 225 MoneyCenters, which provide check cashing, money transfers, bill payment and money orders, and will offer the company's new prepaid Visa debit card, also rolled out last week. The company is also building its own ATM network, which it has tested in several locations.
Last week's announcement comes just two months after Wal-Mart abandoned its bid to obtain a banking charter, after assuring federal regulators and critics that the retail giant had no plans to develop a branch network in competition with its in-branch credit union and bank partners, and community financial institutions. During a year-long controversy over the charter bid, Wal-Mart insisted it sought an Industrial Loan Company charter only to gain access to the Federal Reserve's payments system, in order to save millions of dollars on processing and interchange fees it pays each year.
Some Were Dubious
Despite its claims, some credit union representatives were dubious after last week's announcement. "If that's not banking activity, I don't know what is," said Pat Ramson, vice president of marketing for Landmark CU, which operates two in-store branches at Milwaukee Wal-Marts. Ramson said the $1.1-billion credit union has seen Wal-Mart coming into the market, as it has conducted check-cashing and other financial services in local markets for some time.
But Karen Benedetti, vice president for marketing at Service CU, said the Wal-Mart plans don't appear to conflict or compete with the in-store branches of the $1-billion credit union. "It looks like the overlap is minimal, but consumers have to understand that," Benedetti said.
"The Wal-Mart proposition is not a banking proposition. It is for people who do not have a banking relationship. The products are different," she said.
Taylor Scott, VP of new branch development at ORNL FCU, said he was told Wal-Mart has a less onerous plan for its MoneyCenters. That is to move the high volume of check cashing and other financial services from the customer service center, which processes returns and exchanges, to a designated area, in order to speed up services.
"It sounds a lot worse than what it is for credit unions that are in Wal-Mart now," said Scott, whose Tennessee credit union operates three Wal-Mart branches and plans to open another. "They may hand out brochures about lending and other stuff, but they're not going to doing any lending, as far as I know."
Both the Service CU and ORNL FCU representatives said they were not notified by Wal-Mart of the company's plans, but by Atlanta-based FSI, which develops banking branches on behalf of Wal-Mart and others.
Others Are Ambivalent
Landmark's Ramson said she is ambivalent because if Wal-Mart is successful in its plans, that means that other financial institutions are not adequately doing the job serving the underserved. "If these people aren't being served by other financials in the area then it's a good thing that Wal-Mart's there," she said. "Maybe credit unions need a wake-up call. We're just not against something that can give consumers more choice."
Wal-Mart has been stepping into the financial services market-banking-a little at a time, and already operates one of the largest check cashing businesses in the country. The fear that the giant retailer would do to community financial institutions what it has done to local stores caused a major campaign by community banks to stop the company's bid for a banking charter. The banks helped create such a furor against the ILC application that federal regulators enacted a moratorium on all new ILC requests, then Congress introduced legislation to ban all non-financial entities from owning a bank charter. The legislation is still pending.
The furor convinced Wal-Mart to withdraw its ILC application but not its ambitions in banking. Around the time the company was withdrawing its ILC bid, it was obtaining approval in Mexico to develop its own retail bank network and is in the process of doing so.
The company has also been pilot testing several other financial products it plans to roll out in the coming months. Among them are an ATM network.
Jane Thompson, president of Wal-Mart financial services, called the MoneyCenter services and prepaid cards "foundational products" that the retailer could build upon. Industry sources widely see the company as preparing to offer loan products, like mortgages or home equity loans, as well.
The prepaid Visa cards, to be called Money Cards, will initially cost $8.95 and come with a $4.94 maintenance fee. Cash can be loaded onto the card free by cashing a payroll or government check at Wal-Mart or having the funds directly deposited.
