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Table of Contents

Lead Story

Reload with prepaid

News

Industry Update

Cynergy acquired by ComVest

A certified alternative

Dueling Strategies: VeriFone-Chase, Heartland-Hypercom

Optimism prevails at WSAA

Features

Special report on the ETA's 2009 Strategic Leadership Forum

Brandes Elitch
CrossCheck Inc.

Wal-Mart and the unbanked

Patti Murphy
The Takoma Group

Glossary of common payments industry terms

Research Rundown

Selling Prepaid

Prepaid in brief

Prepaid players expand to meet demand

From coins to customers

In-house, SaaS or PaaS that solution?

Views

Sell, rent, lease or give it away - what to do?

Biff Matthews
CardWare International

Use security to retain merchants

Scott Henry
VeriFone

Education

Street SmartsSM:
Why do we think we're different?

Jon Perry and Vanessa Lang
888QuikRate.com

Start with ripples, not waves

Jeff Fortney
Clearent LLC

Legal aspects of high-risk processing

Adam Atlas
Attorney at Law

Digging into PCI - Part 4:
Encrypt transmission of cardholder data across open, public networks

Tim Cranny
Panoptic Security Inc.

Company Profile

Merchant e-Solutions Inc.

New Products

Consolidated purchasing for truckers

Smart Solutions
Comdata Corp.

A gateway into e-commerce

Brick and Click
First Data Corp., Yahoo! Inc.

Inspiration

Twenty tips for lifelong learning

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

November 09, 2009  •  Issue 09:11:01

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Wal-Mart and the unbanked

By Patti Murphy

Editor's Note: This story was published by InsideMicrofinance.com Oct. 9, 2009; reprinted with permission. 2009 InsideMicrofinance.com. All rights reserved.

For reasons better espoused by others, I've never been a big fan of Wal-Mart Stores Inc. In fact, on those rare occasions when I must shop at one of its stores (that is, when in a rural area where Wal-Mart is the only game in town), I try my best to only purchase loss leaders. (You know what I mean: those unbelievably priced deals that are intended to nudge folks toward pricier items.)

Yet, I have to say, Wal-Mart is doing a bang-up job these days of helping to move unbanked and financially underserved Americans into the financial mainstream.

In the past few months, the retailing giant has announced a sophisticated electronic bill-pay service at its in-store MoneyCenters and a plan to convert tens of thousands of employees now receiving pay checks to electronic payroll systems.

In a press statement last month, Wal-Mart said "associates" must now choose to receive their pay either by direct deposit or on a payroll card. To put this in perspective, consider that the retailing giant's total workforce (workers at both Wal-Mart and Sam's Club stores) exceeds 2.1 million, worldwide.

Sure, I know, direct deposit saves employers money, so why shouldn't Wal-Mart want to pay all its workers that way? But direct deposit is far from universal, and I don't know of any large organizations (save, perhaps, government agencies) with bragging rights to 100 percent employee participation.

I also know Wal-Mart has been making a play to become a bank, and that this is likely part of a grander plan to make that happen. Personally (and professionally) I don't like the notion of a retailer being a bank. But Wal-Mart's efforts to reach consumers who have little or no interaction with financial institutions (the unbanked and underbanked) have given me pause.

After all, this is a company (and wannabe bank) that is bringing sophisticated financial services to folks who either have been ignored or dropped by federally chartered financial institutions.

Banks ignore unbanked at their peril

There's a huge market opportunity in reaching out to the 50 million-plus American households that are now unbanked or underbanked. It's a market that banks have shown little interest in pursuing, according to a report earlier this year by the Federal Deposit Insurance Corp. And that, I suppose, makes this market fair game for a company like Wal-Mart.

The retailer's new electronic payroll program was developed with help from MasterCard Worldwide and First Data Corp. The largest processor of MasterCard- and Visa Inc.-branded payment cards in the United States, First Data is the technology company behind Wal-Mart's POS payments system.

Wal-Mart employees who don't have bank accounts and those who prefer to not receive direct deposit into an existing bank account can opt instead to have their pay deposited to a MasterCard PayCard (a prepaid debit card) and accessible through First Data's Money Network, a payroll card processing and reload service First Data offers its retailing clients.

Employees can also have checks connected to their payroll cards for things like bill pay. According to First Data, funds deposited through its Money Network on the PayCard are FDIC insured.

"Electronic payroll is the right choice for our associates, our company and the environment," said Tom Schoewe, Executive Vice President and Chief Financial Officer for Wal-Mart. "It provides our associates with fast, convenient and safe access to their pay."

"Wal-Mart art is raising the bar for employers everywhere by providing associates who don't have bank accounts with immediate access to funds on payday, without fee or discount, and access to cash at thousands of locations across the country," said Ed Labry, Chief of First Data's Retail and Alliance Services.

Indeed, the program shows how well positioned employers are to help America's working poor transition to the financial mainstream.

Patti Murphy is Senior Editor of The Green Sheet and President of The Takoma Group. E-mail her at patti@greensheet.com.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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