In July of 2005, Walmart filed an application to open an Industrial Loan Bank in Utah. The Utah bank regulator was flooded with 3,500 comment letters describing Walmart’s application as a sign of the Apocalypse. One commenter described a Walmartbank as a “dangerous and unprecedented concentration of economic power.” Others fretted that Walmart would drive independent financial institutions out of business by utilizing its network of stores as low cost bank branches.
Fast Forward to September 24, 2014. Walmart announcedthat it is teaming up with on-line GoBankstarted by the California-based tech company Green Dot. It will start offering off-the shelf, low-cost checking accounts by the end of October to anyone 18 years of age or older with an ID. The mobile account startup kit will be available at Walmartstores nationwide. Customers will have access to 42,000 ATMS. How is this going to impact your credit union? Let me count the ways.
- Say goodbye to even more non-interest income. With GoBank’s mobile banking platform, Walmartand its banking partner clearly feel they can attract enough customers to make up in volume what they losein potential fee income. As Steve Streit, Green Dot’s CEO and founder explained yesterday: “Many so-called ‘free’ checking accounts aren’t really free because they have high overdraft fees. In fact, an independent study by BrettonWoods estimates that consumers pay approximately $218 – $314 per year for a basic checking account.” He further noted: “No other checking account makes it this easy and affordable to manage your everyday finances.” Of course, there is some fine print being glossed over here. There is an $8.95 monthly fee that is waived in any month with qualifying direct deposits totaling $500 or more. Other fees include a 3 percent foreign transaction fee and out-of-network ATM fees (typically $2.50 for an out-of-network ATM plus any fee the ATM owner may assess).
- Walmarthas the potential to challenge traditional banking on two fronts. If you believe that people still want branches to do their banking then you have to fear Walmart. You don’t have to be Nostradamus to see that one day all those bank branches that Walmarthas been gracious enough to lease space to in their stores are going to gradually become GoBankbranches. If you believe, as I do, that banking is going virtual, then by teaming up with GreenDot, WalMart has a mobile platform than can compete with anyone’s as I explained in a previous blog.
