Eight months after it was introduced, Wal-Mart Stores Inc.'s prepaid debit card appears to be making headway with the underbanked.
A study released Monday found that one in five consumers earning less than $40,000 a year is familiar with the Wal-Mart MoneyCard, a prepaid Visa debit card that costs $8.94 up front plus $4.94 a month in maintenance fees. In addition, one in 10 said they were likely to buy one of the cards from the retailer, according to Synergistics Research Corp., which conducted the study in the fall.
Wal-Mart, of Bentonville, Ark., said Monday that it plans to more than double the number of its stores that sell the MoneyCard this year, to 1,000. Observers said the MoneyCard is likely to become a formidable competitor for firms that offer financial services to consumers without traditional access to credit and the banking system.
William McCracken, Synergistics' chief executive, said Wal-Mart's advantage over banks lay in its reputation with low-income consumers, who on average visit Wal-Mart stores almost twice as often as they visit their bank branch. "They are there already for another purpose, and Wal-Mart is viewed in their mind as a low-cost provider," he said. "There is a degree of trust [and] there is a degree of knowledge."
Distrust of the banking system — which is particularly common among Hispanics who may have lost their savings in bank failures in their home countries — tends to make those consumers feel more at ease in Wal-Mart too, Mr. McCracken said. "They don't feel excluded from the selling process from Wal-Mart because they are underbanked or because they are in the lower-income strata of our economy. They are open to hear the pitch" for the cards, "and they pick it up very quickly. Wal-Mart has that and a traditional bank does not."
David Humphreys, a professor who studies banking and payment systems at Florida State University in Tallahassee, agreed that Wal-Mart's "brand is better known than most bank brands. You just have more experience going to Wal-Mart than going to a bank" as a low-income or underbanked consumer.
Low-income consumers using Wal-Mart's financial services benefit from the convenience offered by check cashers without paying their typically steep fees, Prof. Humphreys said.
Jennifer Tescher, the director of the Center for Financial Services Innovation, a nonprofit affiliate of Chicago's ShoreBank Corp., said Wal-Mart's scale and commitment to its financial services business made the MoneyCard a particularly good product over competing prepaid cards.
Many prepaid cards offered for purchase and reload at convenience stores, gas stations, and other small retail locations are often ineffective because employees do not know how to sell or reload the products, she said, and the turnover is high. Wal-Mart's dedicated kiosk structure avoids that problem, Ms. Tescher said. "That's really half the battle. Buying it is one thing, but using it regularly is another," she said.
The consumers surveyed by Synergistics, a consulting group in Atlanta, said they liked the MoneyCard most because it could be refunded if lost or stolen, because it is easy and inexpensive to reload, and because it is available at Wal-Mart. Ms. Tescher said Wal-Mart's $4.94 monthly maintenance fee is toward the low end of monthly fees charged by prepaid card providers.
Wal-Mart waives the fee for consumers who load a portion of their paychecks on the card or deposit $1,000 or more on the card each month. Four in 10 of the consumers surveyed called the waiver a very important feature.
