Every few years, retail giant Walmart Stores tries a financial services experiment that produces a ripple of apprehension throughout the banking industry, then fades into the woodwork. In 2005, Walmart issued a credit card with Discover and it rolled out MoneyCenter kiosks, standalone ATM-like machines at which customers can cash checks, pay bills, transfer money and buy money orders; they've now been installed in 1,900 stores. In 2007, it rolled out a prepaid debit card and deployed full-service MoneyCenters — mini in-store banks providing check-cashing, bill-payment and money-order services — in 1,000 stores.
In June, Walmart president Jane Thompson showed attendees at the Underbanked Financial Services Forum a merchandising unit that will be added to the outside of MoneyCenter kiosks in a small number of stores. The unit's shelves will display the cards customers can use at the kiosk, such as gift cards and prepaid debit cards. The idea, according to Walmart spokesperson Tara Raddohl, is to allow customers to avoid having to stand on line at a MoneyCenter or a store register to get a new, loaded card. "It's about convenience," she says.
Though various observers have said that bankers should be shaking in their boots over the enhanced kiosks, it's hard to see what the big deal is. "I don't think there's a whole lot of shaking going on," concurs Emmett Higdon, former Forrester analyst and current principal at consultancy Prizm Strategy. "This is a continuation of their financial services strategy." He adds that from a return-on-investment perspective, employee-free kiosks make sense for Wal-Mart.
The value of the kiosks for the retailer comes in their combination with prepaid cards. "When you link traditional MoneyCenter services like bill payment and money transfers with a reloadable prepaid debit card that authenticates consumers, then you start to have a Bank of Walmart, where consumers can deposit cash and add cash to their cards, with much more convenient hours," Higdon says.
One question is, do banks covet this Walmart-oriented customer segment, which tends to be the unbanked and underbanked? "It's long been a segment where the profit potential has not been there for bigger banks, despite the numbers; the market is huge," Higdon says. "We've never had a business model that would allow us to offer a lot of these services and still make money from this population."
The prepaid, check-cashing, bill-payment and money-transfer service businesses have been very profitable for Walmart. But the retailer's real intent is to make repeat customers out of the consumers who use MoneyCenter services, Higdon says. "When you get them used to using a kiosk and it feels like an ongoing relationship with the Bank of Walmart, then it gets scarier," he says.
Bankers have long felt that Walmart's financial services activities should be regulated. But the real threat here may be to companies like Western Union and MoneyGram, whose business models depend on high-volume money transfers.
Bottom Line: Though Walmart is expanding its repertoire of financial-services offerings, its kiosk merchandising poses no threat to banks.
