As if George Bailey’s little bank didn’t have enough problems already, it will now have the local Walmart outlet to compete with.
“Saying it hopes to poach customers from mainstream banks, Wal-Mart Stores Inc. is rolling out a mobile checking account with a linked debit card — a program that it promised would remain low-cost by eliminating fees charged for overdrafts or failing to maintain a minimum balance,” report E. Scott Reckard and Shan Li in the Los Angeles Times.
Wal-Mart’s partner in the venture is Green Dot Bank’s GoBank, a mobile banking platform that launched last year. The service will be available in Walmart stores nationwide by the end of October.
“The partnership offers Wal-Mart yet another opportunity to become one of the largest financial services providers in the nation, without many of the regulatory headaches that plague traditional banks,” writes Danielle Douglas in the Washington Post. “Wal-Mart already offers a prepaid debit card, credit card, check cashing and money transfers. The retailer is even a part of a consortium that is building a mobile payment system that limits the role of banks.”
GoBank “is part of Walmart’s long-running push into financial services for people with little or no access to traditional banking,” observe Hiroko Tabuchi and Jessica Silver-Greenberg in the New York Times. “In recent years, many banks have reduced services to those with weak credit. According to the Federal Deposit Insurance Corporation, an estimated 10 million households in the United States do not use a bank.”
“An independent study by Bretton Woods estimates that consumers pay approximately $218 - $314 per year for a basic checking account,” Steve Streit, founder and CEO of Green Dot Corp. and chairman of Green Dot Bank, says in a news release announcing the venture and listing copious features and benefits. “… GoBank is breaking down the barriers to traditional banking and brings the benefits of a FDIC-insured checking account that’s loaded with features to a large segment of Americans.”
“Wal-Mart is becoming a financial institution,” Ron Friedman, a retail expert at consulting and accounting firm Marcum, tells the Los Angeles Times’ Reckard and Li. “They are trying to be a full-service company. Customers come in to put money on the debit card and stay to shop in the store.”
It is disingenuous, of course, to suggest that Walmart is going to singlehandedly knock the little banker off Main Street U.S.A., as it has with retailers over the decades. Small community banks like Jimmy Stewart’s Bailey Building & Loan have increasingly been shuttered or gobbled up by banks from Wall Street.
“The five largest banks by assets now hold 44% of U.S. banking assets and 40.1% of domestic deposits—up from 23.5% and 19.5%, respectively, in early 2000,” the National Review’s Veronique de Rugy reports in a story that blames regulatory burdens such as the Dodd-Frank Act more than market consolidation for the demise of institutions with $10 billion or less in assets. “Correspondingly, small banks’ share of domestic deposits has fallen from 40.4% to 23% since early 2000, and their share of US banking assets has declined from 35.8 to 19.5%.”
“In 1980, 95% of households used a bank branch, according to consulting firm AlixPartners. That number is only 50% now,” Tausche reports. “Consumers can do more transactions without a teller, so banks have been trimming the number of branches they have open,” she writes.
AlixParners’ March 2013 white paper, “The Bank Wears Prada,” concludes that “banks can transcend the limits of their current business model,” however. “Like Miranda Priestly” — the powerful editor of a fashion magazine played in "The Devil Wears Prada" by Meryl Streep — “they can market specific products while also influencing consumer behavior and trends, and connecting supply and demand. Banks can indeed ‘wear Prada’” — become “market enablers” in other words — “for the good of themselves, their customers, and the economy at large.”
“But,” as the report warned on its first page, “they must move fast, and before other operators (whether pure play digital companies or mixed ‘bricks-and-mortar’ operators such as telecom providers and large-scale retailers) do it first.”
Well, being that it’s Walmart that’s gone ahead and done it, there’s a bit more urgency to the task.