Wal-Mart Expands Banking Services

Wal-Mart is expanding its financial services, offering check cashing and money orders along with a new prepaid debit card in its ongoing effort to persuade shoppers to spend more time and money in its stores.

The world's largest retailer said yesterday it plans to double the number of its existing MoneyCenters, where customers can also pay bills or transfer cash, to 450 from 225 by the end of the year. By the end of 2008, about 1,000 stores are expected to have MoneyCenters, roughly a quarter of Wal-Mart's locations.

The company estimated that its fees were 25 to 50 percent lower than those of its competitors and saved customers $450 a year.

The retailer is hoping the new services will boost sales. Wal-Mart's growth has slowed as it has saturated rural and suburban markets, serving 138 million people each week. Its typical customers, who have an estimated household income of $40,000 to $45,000, continue to be pinched by rising gas prices.

Wal-Mart's attempts to attract wealthier shoppers have largely fallen flat. Trendier fashion lines were rolled out too quickly, and sales of home goods continue to be soft. However, an initiative to lower the cost of several dozen prescription drugs to as little as $4, directed at shoppers without health insurance, has proved more successful.

The push into financial services brings the company back in touch with its core customers. Chief executive H. Lee Scott Jr. has said that roughly 20 percent of Wal-Mart's shoppers do not have checking accounts.

"We're offering them a safe place and a card to help them manage their money," Jane Thompson, president of Wal-Mart financial services, said in a written statement.

Wal-Mart has offered basic money services in its stores since 1999, typically through the customer service desk. The pilot MoneyCenter, an area of the store dedicated to such transactions, opened in September 2004. The retailer is working with third-party providers, including MoneyGram International, Certegy, CheckFree Pay and TransUnion, to administer the services.

The Wal-Mart MoneyCard is a reloadable, prepaid Visa card issued through GE Money Bank, with additional services available through Green Dot. The cards do not require a checking account, and users cannot spend more than the amount placed on the card. The MoneyCard costs $8.94 and has a monthly maintenance fee of $4.94 unless users put $1,000 or more on the card each month. There is also a $4.64 fee to reload the card unless it is done through check cashing at Wal-Mart or direct deposit.

"It's convenient for the customer," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment bank, who had worked with Wal-Mart founder Sam Walton. "They're already in Wal-Mart."

Wal-Mart said yesterday that the prepaid card and MoneyCenters were the first of many financial services it hoped to offer, though it declined to elaborate.

Several banking associations remained skeptical of Wal-Mart's intentions. The announcement comes after the retailer's failed bid to obtain an industrial loan company to open a limited-services bank that Wal-Mart said it would use primarily to accept large deposits brokered through third parties to lower costs of such back-room operations as credit card processing. The company was deluged by criticism -- the Federal Deposit Insurance Corp. received 1,500 comment letters on Wal-Mart's application, the most on any issue -- and critics suspected the industrial loan company was just a first step in a broader push into consumer banking.

John Taylor, president of the nonprofit National Community Reinvestment Coalition, which focuses on financial issues in underserved communities, said Wal-Mart's latest plan was a means of working around the previous setback.

"I think it's just bad news all ways around for Wal-Mart to get into the banking business, even if it's just the foot-in-the-door approach that they're taking now," he said. "They've scaled down what they're asking for, but I don't think they've scaled down their intentions."

Camden R. Fine, president of the Independent Community Bankers of America, said he was concerned that Wal-Mart might move into home mortgages or siphon business from community banks.

"Someone always pays," Fine said. "There's no free lunch, and that's what people have to understand."