Walmart uses money services to keep customers, boost sales, and fend off e-commerce competition.
The retailer offers its customers a menu of services that include on-site check cashing, bill payments, money transfer operations, and prepaid cards. Last week it announced that its MoneyCard platform — a prepaid card and budgeting tool accessible through an app and a website — has saved its customers $2 billion since its inception two years ago.
Introduction
Walmart intends these money services to appeal to customers who may be less inclined to turn to traditional financial services providers such as banks, let alone qualify for high-earning cash-back credit cards (MoneyCard gives 3 percent cash back on online purchases, 2 percent at Murphy USA and Walmart fuel stations, and 1 percent cash back in stores). It lowers banking barriers for underbanked customers and offers stiff competition to other retailers wishing to grab this market. It furthermore competes with payday-advance companies as it gives customers the option of accessing their paychecks, through direct deposit, up to two days early.
Walmart wouldn’t comment on whether it has increased sales; the spokesperson said it provided these services to add convenience. Green Dot CEO Steven Streit, whose company is partnering with Walmart on the MoneyCard, told investors in a February earnings call that Walmart retains the commission from MoneyCard usage and that the lender has gained sales in-store and online.
MoneyCard Savings Milestone
The MoneyCard savings milestone represents Walmart’s slow move toward drawing customers into its ecosystem through financial services tools. Recently, the company also initiated a purchase financing option through the startup Affirm in late February. Money services assist Walmart in positioning itself as a retail and financial center for full service to its customers means encouraging customers to visit stores and make more purchases at Walmart. This highlights the significance of hours for the money center at Walmart.
It particularly matters because Amazon, the closest competitor in the field of e-commerce, is seeking low-income and underbanked customers through its discount programs and prepaid cards, which can be reloaded at brick-and-mortar retail locations.
It Offers 3 Types of Financial Products
Walmart now offers three kinds of financial products and has set up quasi-banks in money centers to have some services that earn traffic into the stores. These services include check printing, check cashing, international money transfers, selling money orders, tax preparation, and payment of bills. The prepaid debit cards with features like cashback and saving vaults akin to online banking, credit cards, and point-of-sale financing via Affirm are offered by the retail giant. With cash-back offers and digital savings tools, money services offered by Walmart are not quite aimed at usurping banks but are incentivizing underbanked and low-income customers to save and hopefully spend on Walmart purchases. Kevin Morrison, a senior analyst at Aite Group, said, “The idea of being able to go to one place to get everything done-whether digitally or physically is the strategy they’re working on.”
Amazon Moved Gradually Into Walmart’s Territory
Amazon has quietly stepped in with a prepaid card called Amazon Cash, launched two years ago and could be loaded into retail locations. It even announces grocery stores targeting lower-income consumers in the future. It enables customers to maintain their Amazon balances at over 30,000 participating retail stores across America, including popular chains like CVS, Gamestop, and 7-Eleven. Money services are for keeping underbanked customers deep inside Wal-Mart’s ecosystem so they all can be made to spend their dollars there but for the wider branding play, according to Jonathan Smalley, CEO of data analytics company Yaguara.
“That’s convenient as opposed to predatory,” said Mr. Smalley. “And in the specific race of Wal-Mart vs. Amazon, it’s a huge opportunity for Wal-Mart to say, ‘Look, we aren’t just trying to enhance our bottom line do care for our customers.”
The Main Challenge
The challenge will be keeping the customers interested, particularly as more retailers develop their loyalty programs and finance services for consumers.
‘Walmart sees it necessary to do something in this space, while the challenge is whether the offers are relevant to customers many, they aren’t, and they don’t want to have thousands of cards,’ said Neil Saunders, managing director of GlobalData Retail.
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