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Walmart Thinks Outside the Banks

10/09/2012

Walmart announced an alternative to traditional debit and checking accounts in partnership with American Express. The Bluebird accounts target consumers who either don’t have traditional bank accounts or are fed up with increasing fees from banks.

It will allow for deposits by smartphone and mobile bill paying, with no minimum balance or monthly, annual or overdraft fees. Bluebird was shaped by feedback from consumers who said they were not getting the value they expect from traditional checking account and debit services because of increasingly higher fees. The service will be available next week online and in more than 4,000 Walmart stores.

It’s true the cost of banking has increased recently. A survey this summer of 50 of the nation’s largest banks finds that basic banking costs jumped in just about every category in 2012 including the minimum amount required to open an account which jumped to $408.76 on average up from $391.41.

Walmart has proven to be a shrewd retailer but this move could have ripple effects beyond retail.

One in four (28.3%) of all U.S. households conduct some or all of their financial transactions outside of the mainstream banking system. They’re called the “underbanked” or “unbanked”. The unbanked population is on the rise. 821,000 more U.S. households have become unbanked since the FDIC’s first survey in 2009, representing a 0.6% increase. Their main reason for skipping traditional bank accounts: They believe they do not have enough money to open one or that they do not need or want an account.

Bluebird is about convenience and simplicity. Walmart serves 100,000,000 customers weekly, who spend around $36,000,000 a week at the company’s stores. With 4,253 90% of Americans live within 15 minutes of a Walmart store – they’ve certainly got the convenience thing down.

Most importantly Walmart has embraced Hispanic shoppers like no other retailer.

With a purchasing power expected to reach an unprecedented $1.2 trillion dollars in 2012, and a population already surpassing 50 million, Hispanics are a fast rising consumer force in the United States and perhaps our greatest hope for a sustained economic recovery. In fact, Hispanic growth is fueling an increase in buying power in this country that is yet to be seen in other economies. Put another way, Hispanics are achieving a status as super-consumers that is making other minority groups and even the mainstream consumer look anemic.

Coincidently Hispanics are some of the most likely to unbanked.

The Bluebird concept hits Walmart in the next couple of weeks. Teaming up with American Express gives Walmart the chops to pull this off. Once launched the unbanked will flock to it and banks will be left trying to wring a few more shekels out its customers…which will be unpopular – to say the least.

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