Making it easier for the poor to spend
TEXT OF STORY
Kai Ryssdal: Remember not too long ago Wal-Mart tried to get into the banking business? Ferocious opposition from the banking lobby played a role in stopping that attempt. But it’s not stopping Wal-Mart from offering an ever-larger menu of bank-like services.
A report in the Financial Times today said the next step will be something called the Wal-Mart Money Card. Essentially, it’s a pre-paid Visa aimed at the 80 million U.S. residents who don’t have bank accounts.
It’s not altruism, to be sure. But Marketplace’s Steve Tripoli tells us the nation’s largest retailer may have something to teach competitors about the upside of serving the poor.
Steve Tripoli: Wal-Mart won’t confirm the card’s coming, but the company says it’s no secret that it’s rolling out more financial services.
Folks with no bank accounts already get check-cashing and money transfers at Wal-Mart. The Money Card reportedly will help them get financial services for less.
Analyst George Whalin of Retail Management Consultants says that’s where the company’s cut comes in.
George Whalin: It tends to bind the customer to Wal-Mart even more. If they’re carrying around this Wal-Mart cash card essentially, they’re more likely to go shop in Wal-Mart than J.C. Penney or some other store.
So why don’t J.C. Penney and others follow Wal-Mart’s lead?
Analyst Bernard Sosnick at Oppenheimer says it’s easier to provide financial services to less-profitable, poorer customers when you have Wal-Mart’s scale.
Bernard Sosnick: Wal-Mart has been incredibly effective with logistics and technology. You have to handle a lot of units, you have to be very efficient. It’s tough.
It’s tough, but not impossible. Big banks and retailers have been reluctant to fully embrace poor communities.
But George Whalin says many small retail chains have done good business there. We’re talking 80 million people outside the financial mainstream. They spend money. Whalin says Wal-Mart’s one of the first big players to fully grasp the value of that market.
Whalin: If you look at this tremendous population in the lower-income brackets here in the U.S., I think this is a customer that they’d certainly want to reach out to more and continue to expand that business — and this is another opportunity.
Wal-Mart’s planning to expand space in its stores for financial services. It’s giving customers something its competitors either won’t provide or won’t provide cheaply.
That’s Retailing 101, no?
I’m Steve Tripoli for Marketplace.
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