Walmart Slashes Fees For Money Transfers

Imagine you’re selling something for $85 and Walmart comes along and says it’s going to offer an identical service for under $10. That’s an extreme example of what happened yesterday when the retailer announced plans to get into the money transfer business, undercutting the fees charged by the two big players in the game, Western Union and MoneyGram.

“The company is partnering with Ria Money Transfer to launch Walmart-2-Walmart Money Transfer Service, allowing customers to transfer as much as $50 for a $4.50 fee, and up to $900 for a $9.50 fee from more than 4,000 of its stores,” reports CNBC’s Krystina Gustafson.

Ria is a subsidiary of Euronet Worldwide, which is based in Leawood Kansas. There is a $900 daily transfer limit per customer.

“Walmart-2-Walmart brings new competition and transparent, everyday low prices to a market that has become complicated and costly for our customers,” Daniel Eckert, SVP of services for Walmart U.S. said in a statement. “We’re doing what we do best — launching a new service that challenges the status quo and drives down prices for our customers.”

The service will only be available in the U.S. — at least for now. The statement puts competitors’ fees for transferring $800 to $900 at $57 to $76. But “Western Union on its website puts the price of transferring $900 in New York between $20, if using a bank account, to $85 if using a credit or debit card,” points out the AP’s Anne D'Innocenzio in USA Today.

Dallas-based MoneyGram, which has provided money-transfer services in Wal-Mart stores since 2001, “said it was surprised by the move,” according to The Wall Street Journal’s Paul Ziobro and Anna Prior. Its share plummeted 17.7% while Western Union fell 5%.

The new service will compete with the existing MoneyGram service, “fueling speculation over the future of their contract,” Forbes’ Clare O’Connor observes.

In a conference call with analysts Thursday morning that MoneyGram said it would post to the Investor Relations portion of its website but had not as of Friday morning, chairman and CEO Pamela H. Patsley “said there are no immediate plans to match Walmart’s prices at the stores or at other U.S. locations,” Hanah Cho writes in the Dallas Morning News. “Patsley noted that the price difference is 25 cents for money transfers up to $50 and $2 for transfers between $50 and $200.”

For its part, “Western Union said it was well-positioned in the business, saying it offered services through a network of about 46,000 agents in the United States alone,” reports Reuters’ Phil Wahba, who notes that “U.S. domestic money transfer represents about 8% of its total 2013 revenue.”

Andrew Jeffrey thinks Walmart-2-Walmart “casts a pall over Western Union's pricing model and long-term organic revenue growth outlook” while Sterne Agee analyst Jennifer Dugan doesn’t believe it will “have a significant impact on Western Union's market share and average pricing,” Wahba reports.

Walmart itself points out in its release that “almost 28% of Americans are classified as either underbanked or unbanked, with millions using money transfers as a critical part of maintaining household budgets or helping friends and family in times of crisis.” It cites military families and oil field workers as primary targets.

“Walmart’s latest initiative is savvy,” writes Forbes’ O’Connor, given the high percentage of low-income families who often “rely on costly alternative financial services, like short-term, high-interest ‘payday loans’ offered by companies targeting those on the fringes of the banking system.”

“The new service brings Wal-Mart even deeper into the business of providing traditional banking services even though the company technically isn't a bank,” write the WSJ’s Ziobro and Prior. “Wal-Mart offers check cashing, bill paying, money orders and tax-preparation services, as well as prepaid card programs, to its core low-income customers, many of whom are left out of the traditional banking system. The retailer still doesn't provide other key banking services such as taking deposits or making loans.”

Walmart isn’t the only retailer encroaching on territory once dominated by banks, Elizabeth A. Harris points out in the New York Times. “Costco offers mortgages, for example, and Home Depot provides loans to help customers finance improvement projects,” she writes. “Walmart actually sought a banking charter for years before abandoning the effort in 2007.”

“In many cases, these services crop up in response to demand, but it’s also a space that’s less regulated,” Consumers Union staff lawyer Suzanne Martindale tells Harris. “There may be weak protections or a patchwork of protections.”

Guys with crooked noses have known that for years, and their rates tend to be a lot higher and collection techniques more extreme.

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11 comments about "Walmart Slashes Fees For Money Transfers".
  1. Adam Smith from Center for Economic History , April 18, 2014 at 9:35 a.m.
    I found the author's reference to "Guys with crooked noses" as offensive and anti-Semitic. The financial service companies in this space are public companies. The author lost all credibility when he added this unnecessary paragraph. It was rude, crude and unbecoming a member of the media. A respected journalist would never muck up an article with hate and bigotry as this author has done!
  2. Paula Lynn from Who Else Unlimited , April 18, 2014 at 10:18 a.m.
    Another way Walmart pushes people into indentured servitude. Pay them substandard wages, treat them as if they were slugs (see lawsuits for details), absorb their corporate welfare by increasing profits from food stamps. How long before they rent substandard housing ?
  3. Thom Forbes from T.H. Forbes Co. , April 18, 2014 at 10:42 a.m.
    I apologize that you saw the reference as anti-Semitic, Mr. Smith. It certainly was not intended to be. It was a reference to lower-income Americans having to rely on loan sharks whose enforcers — low-level gangsters — tend to have broken noses from their activities. Maybe I read too many Hardy Boy books in my youth or was too enamored of the legend of "Wild Bill" Hickok, who was shot and killed by "Crooked Nose Jack" McCall.
  4. Paula Lynn from Who Else Unlimited , April 18, 2014 at 7:14 p.m.
    Thom, just a little catch up. Ghetto is an Italian word which describes the area in Venezia where the Christians forced the Jewish population to live after they stripped them of all of their possessions, homes and land. The only occupation they were allowed was money handling and some cloth sales. When you see the illustrations of the 14 and 1500's of the "Jews" of the Ghetto with notations of crooked noses. They were called thieves and is where the Hardy Boys and Wild Bill Hickok authors perpetuated the anti-semitism into their stories. The Ukraine is now publicly continuing the policy of the Nazis so the reference has consequences. "Lest we forget." You do know who and what the Waltons support.
  5. Jennifer Finger from KeenReader Inc. , April 18, 2014 at 9:45 p.m.
    Thom, regardless of your intentions, the Nazis used posters of Jews with crooked noses as propaganda. It's a too deeply ingrained stereotype now to have any other meaning. And given efforts by people in the Ukraine to force Jews there to "register" with the government (something else the Nazis started out doing) it really resonates for the wrong reason. Please lose this stereotype forever. It just sends the wrong message about your intentions.
  6. Thom Forbes from T.H. Forbes Co. , April 19, 2014 at 7:38 a.m.
    The despicable stereotype I am familiar with is "hooked" nose but your comments make it clear that I should not have used this too-similar phrase. I won't again. Thanks for the feedback.
  7. Clint Dixon from Sem Advance , April 21, 2014 at 8:30 a.m.
    How about everyone get on topic and off the nose stereotype....Here's the thing....people of all types have crooked noses you dolts!!!
  8. Clint Dixon from Sem Advance , April 21, 2014 at 8:42 a.m.
    Walmart has been charging $5.00 for 50.00 transfer's for years....nothing new here. . . . And in all honesty no company should be allowed to charge 10% for electronic wire transfers that cost pennies to perform. . . But American politicians wouldn't be able to grab more money if they enacted legislation to keep things ethical. .
  9. Mike Einstein from the Brothers Einstein , April 21, 2014 at 6:23 p.m.
    @Thom, I got the intended reference immediately. Kind of scary to think you had to explain it.
  10. Jonathan Hutter from Garrand , April 22, 2014 at 4:56 p.m.
    As a Jew, I took no offense at the reference.
  11. Patrick Willson from Northandloans , August 12, 2014 at 6:40 a.m.
    Walmart reduces fees on money transfers, while citizens of other countries with more modern banking systems pay no fees for money transfers at all. People have to waste their hard-earned money and big corporations tell them to be happy! People get robbed in legitimated way, get into debt trap, and have nothing to do but apply to Installment Credits company operating online to solve their financial problems. Cui prodest?