Federal Reserve Bank of Kansas City
While fintechs and traditional financial institutions continue to introduce new types of financial services, Walmart and Apple recently announced plans to offer more traditional financial services: checking and savings accounts, respectively. This Payments System Research Briefing examines the two companies’ new offerings, their motivations and target markets, the likely outcomes for their respective customers, and potential implications for the financial services industry.
Walmart: From check cashing services to checking accounts
With Walmart’s emphasis on low prices, many of its customers have relatively lower income than the average U.S. consumer. More than 50 percent of Walmart’s 100 million consumers have income of less than $50,000.[1] Lower-income consumers may not have a bank account (unbanked) or may rely heavily on alternative financial services (underbanked), which may be one reason Walmart has long offered an array of financial services.
In the early 2000s, Walmart started offering financial services such as check cashing and money transfers. In 2007, after previous unsuccessful attempts to get a banking charter, Walmart began opening Walmart MoneyCenters in its stores to expand its financial services, including money orders and bill payments. Through a partnership with GE Money Bank and Green Dot Corporation, Walmart introduced the Walmart MoneyCard among other prepaid card offerings.[2] MoneyCard can be funded through direct deposit or with cash and offers cash back, overdraft protection, access to ATMs, online bill payment, and a savings feature with no monthly fee.[3] Walmart reports that more than one million of its customers use MoneyCard.
In June 2021, Walmart announced that it would convert MoneyCard from a prepaid card to a checking account through Green Dot’s Go2bank mobile banking app. This conversion provides MoneyCard users with the additional benefits of access to a secured credit card with no credit check or annual fee, higher interest on savings, and enhanced rewards. MoneyCard accountholders can manage their finances either digitally or at any Walmart location or Green Dot retail distribution location nationwide. The Go2bank app also provides alerts and security features to help users manage their accounts.[4]