• by Sarah Mahoney  @mahoney_sarah, June 21, 2007

To heck with luxury marketing. In its latest move, Wal-Mart Stores is targeting the nation's poorest demographic.

The company says it will have 1,000 Wal-Mart MoneyCenters in operation by the end of 2008. And it is rolling out a Wal-Mart MoneyCard, a reloadable prepaid debit card that doesn't require a bank account or a credit check, with national availability by year's end.

The announcement is hardly a stunner. Wal-Mart, which leases space to local banks in many of its stores, has been toying with the idea of its own consumer bank for years. But consumer groups and politicians have always shot down its plans. In March, it withdrew its application with the Federal Deposit Insurance Corp. to acquire a specialty bank in Utah.

But the money centers--about 250 are already in place--aren't banks. They don't accept deposits or make loans, and as a result, don't need any banking charter, says an FDIC spokesperson.

Instead, the centers target "the millions of unbanked and underserved customers who visit Wal-Mart each week for their basic money service needs," the company says. The FDIC estimates about 10 million U.S. households are too poor to have a bank account, and millions more are underserved. (In Wal-Mart-speak, these customers are "outside mainstream banking.")

The money centers will provide such services as check cashing, money orders, bill payment and money transfers. The services will be provided at significantly lower rates than Mom-and-Pop check-cashing storefronts. (The centers also compete with larger money-transfer firms, such as Western Union.)

Wal-Mart says it will offer savings of 25% to 50% or more over such providers, with a typical "unbanked" customer saving as much as $450 a year.

Observers say the move has obvious advantages for Wal-Mart, which has been struggling for ways to increase sales even as it has had to scale back expansion plans.

BDO Seidman recently issued a report rating the largest risk factors retailers face in expansion plans, and found that 84% of retailers worry that "adverse community reactions," exactly like the ones that have dogged many of Wal-Mart's growth efforts (including banking) will impede growth.

"There is a real perception among consumer groups and tangential businesses that these large retailers are a threat as they continue to look for opportunities to expand," says Doug Hart, a partner in BDO Seidman's retail and consumer products practice.

Wal-Mart's move, he says, demonstrates how willing retailers have to be to step outside objections in order to expand their reach.

"This is an example of how retailers have had to adjust their plans in reaction to public and regulatory sentiments," Hart says. "It shows their flexibility, because they have come up with a way to provide more convenience to their customers and expand their business, while being politically sensitive."