Wal-Mart venture seen as filling banking void

GoBank targets low-income people that other financial institutions deal out

Wal-Mart's plunge into the everyday banking business should appeal to consumers who have little to no access to traditional banking, experts said Wednesday.

The retail giant announced this week that it is starting a mobile banking program called GoBank. The program comes with a MasterCard-branded debit card and will be offered exclusively through select Wal-Mart stores nationwide by the end of October.

"There's a need there," said Randy Koontz, first vice president of investments for the Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers. "There's a void that's not being filled by traditional banks."

Some people don't trust banks; others don't have enough money to warrant the trouble of opening and maintaining accounts, Koontz said.

GoBank, a product of Pasadena, Calif.-based Green Dot Corp., has no overdraft fees, minimum-balance fees or monthly fees with qualifying direct deposits.

Bill Holmes, president and chief executive of the Arkansas Bankers Association in Little Rock, said the banking industry in Arkansas was still sorting out the details of Wal-Mart's GoBank but that the program would be a draw for "the very young with very little."

In recent years, many banks have shied away from offering services to customers who have weak credit. The Federal Deposit Insurance Corp. has estimated that 10 million U.S. households do not use banks. GoBank debit-card holders need only to pass identification checks. Many people with bad credit or who have had returned checks with other institutions will be able to get GoBank accounts. GoBank services also are expected to appeal to people on Social Security or fixed pensions.

Many of those folks are in the low-income category that makes up Wal-Mart's core customers. After lackluster sales at the retailer's U.S. stores for several quarters in a row, Wal-Mart has said that business and customer traffic won't likely pick up until its customers get solid financial footholds.

After withdrawing its ongoing efforts to obtain a bank charter in Utah in 2007, Wal-Mart has baby-stepped its way into financial service offerings that don't require charters. Earlier this year, Wal-Mart introduced Walmart-2-Walmart, a money transfer service intended to compete with Western Union Co. and MoneyGram. Then the retailer introduced first-of-its-kind online auto insurance comparison shopping, AutoInsurance.com, in stores. Both measures are expected to attract more traffic into stores, which can translate into sales of other goods.

"When Wal-Mart decides it is going to enter a business, they will do it someway and somehow. Although it took several years, they have found a way to offer more banking services," Koontz said.

In a news release issued Wednesday by Wal-Mart and Green Dot, Steve Streit, founder and CEO of Green Dot Corp. and chairman of Green Dot Bank, quoted an independent study by Bretton Woods estimating that a consumer pays $218 to $314 per year for a basic checking account.

"GoBank is breaking down the barriers to traditional banking and brings the benefits of a FDIC-insured checking account that's loaded with features to a large segment of Americans," Streit said. Some 14 million shoppers cross the thresholds of Wal-Mart stores each week.

However, there will be some charges with GoBank. Accounts with direct deposits of less than $500 a month will cost $8.95 a month, though that is a fraction of what some banks charge for overdrafts and returned checks.

"Adding the GoBank checking account to our shelves means our customers will have exclusive access to one of the most affordable, inclusive and easy-to-use checking accounts in the industry," said Daniel Eckert, senior vice president at Wal-Mart.

With a GoBank account, a consumer buys a $2.95 starter kit and can begin spending immediately. Other charges will include a 3 percent foreign transaction fee and a $2.50 out-of-network automated teller machine fee.

The program also offers early payroll direct deposit so customers can get their paychecks deposited earlier than their normal paydays if their employers notify GoBank of deposits in advance. Users also can instantly send money to one another at no charge by email or text message. Shoppers also may use GoBank on iPhone, iPod Touch or Android devices.

Green Dot Corp. and its wholly owned subsidiary bank, Green Dot Bank, focus on serving low- and moderate-income American families with financial products that include prepaid cards, checking accounts and cash-processing services that are distributed through a network of some 95,000 retail stores, neighborhood financial service centers and digital channels. Green Dot Bank is in Provo, Utah.

"When our customers have options, they win," said Eckert.

A Section on 09/25/2014

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