Soon, money transfers by Wal-Mart

Wal-Mart Stores Inc. announced Thursday that it’s getting into the domestic money-transfer business, using lower fees and a simplified process to undercut competitors Western Union Inc. and MoneyGram International Inc., which already offers money-transfer services in Wal-Mart’s 4,000 U.S. stores.

Wal-Mart locked arms with Euronet subsidiary Ria to create Walmart-2-Walmart, which will be available in stores Thursday Euronet Worldwide Inc. is a global leader in processing secure electronic financial transactions.

Wal-Mart said most frequent users will be students, members of the military and immigrants who have a need to send or receive money from family, friends and business partners. The new service also will benefit those who don’t have a bank account.

Walmart-2-Walmart will have two only fees: $4.50 for transfers up to $50 and $9.50 for transactions up to $900. Services will be offered at all Wal-Mart Supercenters, discount stores, Neighborhood Markets and Express stores. In most cases, transactions will be handled at the customer-service desk, with a Wal-Mart employee acting as the authorized agent. Walmart-2-Walmart will not be available to and from outside the country or online.

More than ever, size matters. The new service is believed to be a first for the retail industry.

“Walmart-2-Walmart leverages our existing footprint and the large-scale systems that our company can bring to bear to enable low-cost services such as this,” said Daniel Eckert, senior vice president of services for Wal-Mart U.S.

Besides a handful of “mom and pop” money-transfer businesses, Western Union and MoneyGram take the lion’s share of the domestic business, Eckert said. The cost of transferring $900 through Western Union is $76; MoneyGram charges $73. Both collect $4.75 for transactions on principal amounts of $50. Unlike Wal-Mart, both companies have a staggered pay structure based on the amount of the transfer.

To send money via Walmart-2-Walmart, users must have cash or a bank debit card accessed by a personal identification number, or PIN. To accept money, users need only to supply a PIN or answer a security question to complete transactions - no identification is required.

The maneuver by Wal-Mart was seen as cause for concern among its competition.

“It’s never good when Wal-Mart enters your business and decides to significantly underprice your price,” said Randy Koontz, first vice president of investments at Pinnacle Wealth Management of Raymond James in Rogers. Just ask the banks, which have so far been successful at staving off competition from Wal-Mart, he said.

The world’s largest retailer tried years ago to get a bank charter but was turned down. “This shows Wal-Mart still has a strong desire to be in the financial-services business,” Koontz said. “It’s a way for them to participate and profit from the financial-services business without being a bank.”

Wal-Mart offers plenty of bank-like services, including check cashing, bill paying, money orders and tax-preparation services, as well as prepaid-card programs through the Walmart MoneyCard and Bluebird, a checking and debit alternative.

Thursday’s news rattled Western Union shares a bit, but MoneyGram took the biggest hit, with a nearly 18 percent drop in stock price. The company’s stock closed at $14.81 per share, down $3.18 from $17.99 at the market’s close on Wednesday. Wal-Mart stock showed little change from Wednesday.

Eckert said Wal-Mart did not have “any specific conversations” with MoneyGram about starting a competing business within stores. The retailer has partnered with MoneyGram to offer money transfers in the U.S., Mexico and other countries for more than a decade. The three-year contract went into effect this time last year.

Michelle Buckalew, with MoneyGram Global Communications, said Wal-Mart and MoneyGram’s pricing was agreed upon by both parties.

“Many decisions around pricing, product offerings and channels are made jointly to ensure strong performance and success for both companies,” she said. The current contract allowed Wal-Mart to investigate possibilities of starting its own domestic money-transfer services “at their discretion,” she said.

In last year’s fourth quarter, Wal-Mart’s business with Moneygram represented 26percent of that company’s total revenue - with half attributed to Wal-Mart domestic money transfers.

Customers will still need to use MoneyGram for transfers over $900 or for transactions into and out of the country. Nor will Walmart-2-Walmart handle transfer requests online.

While Wal-Mart hopes to simplify money transfers, Dan Diaz - vice president of global corporate communications for Western Union - said in an email that, with more options, the U.S. customer is better serviced. For transfers within the United States, people can send money in minutes or on a next-day basis, from a manned location or online and they can also send money directly into a bank account.

Diaz also said the greater part of the revenue from domestic transfers is generated from principal amounts less than $300. Domestic transfers, including online transactions, accounted for just 8 percent of Western Union’s revenue in 2013.

Business, Pages 25 on 04/18/2014

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