Walmart Makes a Bet on the Future of Banking

October 10th, 2014
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Photo: Business Wire

When Wal-Mart Stores Inc. announced its partnership with Pasadena, Calif.-based Green Dot Corp. to launch the online and mobile-only banking alternative GoBank, the retailer was also placing its bet on where the future of banking is heading. But with all its other financial ventures up to this point still in place, like in-store branches and prepaid debit cards, Walmart is keeping a hand in all possible outcomes.

Not only is GoBank designed with modern features that would be appealing to any consumer looking for more advanced mobile banking, the account is low cost and open to almost anyone over 18 with i.d. verification. This makes the account extremely attractive to customers who simply aren’t satisfied with their current bank relationship or have limited access to traditional banking.

Data from the annual Consumers and Mobile Financial Services report published by the Federal Reserve shows that people who are unbanked (do not have a bank account) make up 11 percent of U.S. consumers, while the underbanked (minimal access to bank services) make up 17 percent. And according to data from statistician Nate Silver’s web site, Fivethirtyeight.com, states with higher percentages of unbanked households are home to more Walmart stores. Since Walmart’s traffic is more likely to have a high concentration of unbanked and underbanked customers, GoBank allows the retailer to seize the opportunity to help those people get banking products, which helps GoBank’s business grow and allows people to spend more money in Walmart stores.

“GoBank is breaking down the barriers to traditional banking and brings the benefits of a FDIC-insured checking account that’s loaded with features to a large segment of Americans,” said Green Dot CEO Steve Streit in a statement.

The move to launch GoBank now gives Walmart the opportunity to target consumers from three different angles—the traditional branch, prepaid cards and GoBank—in order to appeal to the underbanked or now, any modern bank customer.

Traditional Branches
The retailer is already offering traditional branches in nearly 40 percent of its U.S. stores. With more than 700 branches in Walmart, Woodforest Bank, headquartered in The Woodlands, Texas, has the largest presence out of the total of more than 1,600 in-store banks. Woodforest serves the underbanked with its trademarked Second Chance Checking, created to give people who would typically be denied a traditional checking account the opportunity to open one.

Prepaid Cards
10-10-14-StrategyCorps2.pngJust two years ago, Walmart partnered with American Express to launch the Bluebird prepaid card as another alternative to traditional debit and checking accounts. The prepaid cards have functionality very similar to a traditional debit card.

In Walmart’s October 2012 press release for the launch, American Express group president Dan Schulman (who was recently named the new CEO of PayPal) stated its purpose: “In an era where it is increasingly ‘expensive to be poor,’ we have worked with Walmart to create a financial services product that rights many of the wrongs that plague the market today.”

GoBank
Walmart isn’t necessarily bidding GoBank against Bluebird or its in-store branches, but rather, it is opening up even more options for underbanked customers who want to use mobile banking. The Federal Reserve found that in the U.S., 49 percent of the unbanked and 64 percent of the underbanked has access to a smartphone.

10-10-14-StrategyCorps3.pngGoBank has features more advanced than basic mobile banking. For example, its Fortune Teller feature can become a budgeting resource for customers’ shopping decisions. You simply enter how much an item costs, and the Fortune Teller is able to instantly tell you if you can afford it or not based on the budget you set. “Remember that time you won the lottery? I don’t either,” is one message you can expect from the Fortune Teller, along with lots of humanized language that’s a refreshing update from standard bank formality.

To open a GoBank account, customers buy a $2.95 starter kit at Walmart. Instead of paper checks, customers can use online bill–paying services. There are no minimum balance requirements and no overdraft fees. Plus, customers have access to 42,000 free ATMs throughout the country. The $8.85 monthly fee is waived with a direct deposit of $500 or more each month.

Of these three ventures, the financial industry will keep an eye on which survives in the long run and becomes Walmart’s go-to product.

saxton

Sicily Axton is the communications manager for StrategyCorps, a Nashville-based company that works with financial institutions nationwide to deliver mobile and online consumer checking solutions that enhance customer engagement and increase fee income. Follow Sicily on Twitter and LinkedIn.