Walmart is an Unintended Winner of Bank Transfer Day

Americans have been outraged by banks, but oddly enough Wal-Mart (NYSE:WMT) is being rewarded.

26-year-old factory worker, Geoffrey Cardone, cleaned out his bank account saying he felt he was being “nickeled and dimed by fees.”  He has decided that on payday he will be making a trip to Wal-Mart.  It’s cheaper,” Mr. Cardone said.  The cost to cash a paycheck at Wal-Mart is a flat-fee of $3. Given the current economic environment, this phenomenon should be concerning to banking giants Bank of America (NYSE:BAC), JP Morgan (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC).

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At the Money Center inside Wal-Mart (NYSE:WMT) across the country, customers can cash work and government checks, pay bills, wire money overseas, or load money on to a prepaid debit card.  In Wal-Marts without Money Centers, these financial services are offered at the customer service desks or kiosks.

Four years ago,  Wal-Mart (NYSE:WMT) decided not to venture into the banking business (NYSEARCA:XLF) due to opposition from the banking industry and lawmakers who worried the large corporation would drive small bankers out of business.  Since then, Wal-Mart has built their own pick-and-choose financial services, becoming a force among the unbanked and “unhappily banked,” as one Wal-Mart executive put it.  Wal-Mart does not have any plans on becoming a full-blown bank even though they have obtained bank charters in both Mexico and Canada.

“We have a tremendous opportunity ahead of us, and it’s largely due to what you’re seeing around us happen in the industry,” said Daniel Eckert, the head of  Wal-Mart (NYSE:WMT) Financial Services.  “We’re not a bank, but we can serve a lot of types of functions you would see someone go into a bank for.”

Wal-Mart (NYSE:WMT) said it is offering financial services for less the same way it does any of its other products.  The retailer can avoid financial regulations since they are selling on behalf of other financial firms.  For example, prepaid debit cards are through the Green Dot Corporation.  The cards cost up to $4.95 to buy and $5.95 a month at other retailers, at Wal-Mart the cards are $3 to buy and $3 a month.

“It is a big focus,” said Tien-tsin Huang, an analyst at J.P. Morgan. “They’ve invested in these Money Centers, and they’ve been very, very successful; they’ve all adopted the low-cost, low-prices model, and I think it’s brought in a lot of traffic that they normally wouldn’t see, meaning the lower-end demographics that typically use check-cashing services at rival stores.”  He added, “It’s clearly growing a lot faster than what we normally see for check cashers.”

Other companies are reaping the benefits from the banking protests as well.  According to the Credit Union National Association, more than 650,000 people have signed up for credit unions recently.  Occupy Wall Street’s Bank Transfer Day, an initiative to have people ditch their traditional banks, will continue to add to these numbers.

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