How Walmart’s money services compete with payday lenders and check cashers

While Walmart may not be a bank, its recent upgrade of in-store financial services may suggest it has broader aspirations than just low-priced consumer products. Last week, the retailer began offering what it calls in-store Express Money Services in New Hampshire, West Virginia, Indiana and South Carolina, making it easier for consumers to carry out in-store money transfers. It's a move that could stem the flow to payday lenders and check cashers. "This is just a way for them to get lower-income people into the stores and continuing to attack the lower-income demographic that's out of Amazon's reach -- it's more of a defensive rather than an offensive strategy," said Morningstar analyst John Brick. Walmart has long offered money transfers, check printing and bill-pay services. But money transfers used to involve lengthy paperwork. The retailer announced on Thursday that customers can set up the money transfer at home through the Walmart mobile app, and pay a cashier the value of the money transfer in an express lane at the store. The retailer said it intends to expand the roster of financial services offered through the express-lane service, including bill payments and check cashing. Walmart has attempted to move into financial services for over a decade, with a bid to buy Franklin Bank of California blocked in 2002 and a 2005 application for an industrial loan company charter (a banking license that lets a nonbank offer bank-type services) that was withdrawn two years later. Still, Brick said Walmart's upgrade of its financial services offerings is more of a tactic to keep customers in the stores rather than to create a new financial services empire. When asked if the recent upgrade is a sign of a bigger focus on financial services from Walmart, Brick said establishing a bigger presence online is likely to be a bigger priority over the next five years. A large-scale expansion of financial services offerings would only be foreseeable after the retailer has solidified its presence as an online retailer, he added. One financial sector that may feel a pinch is payday lenders. "When they enter our market, they're the 10,000-pound gorilla," said Jamie Fulmer, svp of public affairs at Advance America, one of the largest payday lenders in the U.S. "It's clearly been on their radar screen; Walmart's renewed interest [in financial services] is indicative of a realization that the consumer is redefining the financial mainstream." Despite the threat Walmart presents, Fulmer said the competition is good for the market and a win for consumers. "It becomes a competitive concern for us -- we'll do everything we can to compete with Walmart on quality and service," he said. "We believe the marketplace is best served when the market has more providers for competing for business."