Persistence has finally paid off for Walmart, the world’s largest retailer. After trying unsuccessfully for several years to obtain a banking charter – the last time was in 2005 – it now has a bank that will offer FDIC-insured checking accounts to its customers. Walmart’s previous attempts to secure a traditional bank charter met with strong opposition from commercial banks as well as banking regulators.
The new institution, called GoBank, will provide a limited number of products and services in Walmart stores by the end of October. In addition to checking accounts, GoBank will offer bill pay, free money transfers, and a debit MasterCard.
The bank will charge a service fee of $8.95 per month. But the charges will be waived as long as customers have a monthly direct deposit of $500 or more. All other charges, including overdraft fees, will also be waived. And customers will have access to 42,000 ATMs without paying withdrawal fees.
Banking services will be offered through a partnership with Green Dot, a firm located in Pasadena, California. Green Dot is an issuer of prepaid MasterCard and Visa cards. These products currently are available at more than 60,000 retail stores, including Walmart, CVS. Rite Aid, Walgreens and Radio Shack.
GoBank’s target customer base will be individuals who are known as the “unbanked.” They generally obtain financial services through network of high-cost providers such as payday lenders, storefront check cashers, money order issuers, and other high-fee providers. This group needs the kind of services – money orders, in-person check cashing, and other face-to-face transactions – that banks cannot profitably offer.
Requirements to open an account will be minimal. Individuals will not have to undergo a credit check, and accounts will be available to anyone 18 years of age and older with proper identification.
Why is Walmart pursuing this strategy? The company is attempting to attract more customers. Traffic at its stores has declined for seven straight quarters. Banking services could bring in additional customers, many of whom will purchase Walmart products.
At first glance, Walmart’s strategy seems to be a win-win for the company and its customers. By offering banking services, Walmart will be serving a need that currently exists. And it can place its financial centers in existing stores without substantially increasing its costs.
Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean. Email him at wccurtis39@gmail.com.
