Wal-Mart Wades Into Serving Its Underbanked Customers - An Update

Analyst: Bill Bradway

March 16, 2010

In 2007, three A & O Briefs were published that covered Wal-Mart’s banking initiatives (2007-04, 2007-13, and 2007-19). The first one covered the demise of Wal-Mart’s two year journey to gain a US banking license, concluding that Wal-Mart would find another way to skin the cat. The second one covered Wal-Mart’s revised initiative to serve underbanked customers. The third one put Wal-Mart’s bank initiative in Mexico into a historical “retailer tries banking” context. Cumulatively, the three briefs made the point that Wal-Mart would find a way to serve its customers with banking services locally in a manner that fit its overall business strategy.

On March 15, 2010, Wal-Mart updated its status on its MoneyCenter initiative. 1,000 of 3,500 US stores are now operating a Wal-Mart MoneyCenter. 2010 plans call for adding a MoneyCenter to 500 more stores. These are in addition to approximately 200 Wal-Mart stores that rent floor space to FDIC chartered banks like Woodforest Financial Group’s banks, which operates in over 100 Wal-Mart stores. Wal-Mart has claimed for several years that its real goal has been to “serve its customers” and lower its transaction processing costs. One of Wal-Mart's guiding principles is to continuously shrink operating costs and cost of goods sold as a basis for offering “always low prices.” This promise includes banking services!

• Is Wal-Mart on to something at the expense of bankers?
• Are Wal-Mart customers gaining access to banking services they otherwise would not have?
• If so, which firms are losing out?
• Bank Tech vendors may wonder: have we missed Wal-Mart’s train?

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