Category Archives: Innovation

Wal-Mart Dives Deeper in Banking

Wal-Mart Stores Inc. is taking another step deeper into banking, rolling out a new money-transfer service that undercuts rivals including Western Union Inc. and MoneyGram International Inc. with lower and simplified fees.

The giant retailer on Thursday unveiled the new service, Walmart-2-Walmart, which will allow customers to send and receive up to $900 at a time at more than 4,000 stores. The new service applies only to payments that are sent and received in the U.S.

It aims to take a bite of the roughly $900 billion in so-called person-to-person payments made each year in the U.S., often in the form of cash or checks.
“This is a relatively easy service for Wal-Mart to develop, because it fits with the customer base that they already have, and they don’t have to spend a lot of money to create, implement or market the service,” said Ron Shevlin, a senior analyst at Aite Group, a consulting firm that specializes in the payments industry.

The service launches April 24. Wal-Mart said the service fees – $4.50 for transfers up to $50 and $9.50 for transfers up to $900 – are 50% or more below the cost of existing offerings. For its new service, Wal-Mart is partnering with Euronet Worldwide Inc.’s Ria Money Transfer subsidiary.

The money-transfer business carries substantial regulatory burdens aimed at preventing money laundering. Wal-Mart has been registered with the Treasury Department’s Financial Crimes Enforcement Network as a money-services business since 2011, according to FinCen’s public database. The move also could place Wal-Mart under the scrutiny of the U.S. Consumer Financial Protection Bureau, which was set up after the financial crisis to police the lending industry for abusive practices involving consumers. The CFPB already has proposed supervising nonbank providers of international money transfers. The vast majority of U.S. money transfers involve sending money overseas, according to payments experts. The U.S. is the largest sender of such payments, accounting for nearly one-quarter of the $529 billion in remittances that international migrants sent to their home countries in 2012, according to the World Bank.

In addition to competing with Western Union and MoneyGram, Wal-Mart also is taking on banks that allow their customers to transfer money to other customers. In 2011, J.P. Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. formed a joint venture to let people use their checking accounts to send each other money with an email address or cellphone number.

“The banks have failed miserably in capturing the person-to-person payments business,” said Mr. Shevlin, the payments analyst.

Walmart transfer pricing

via Wal-Mart Undercuts Rivals With New U.S. Money Transfer Service – – Article by Paul Ziobro & Robin Sidel.

Wal-Mart Dives Deeper in Banking – PDF


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Banks Mostly Avoid Providing Bitcoin Services

Companies trying to cash in on the newfangled bitcoin craze are having trouble getting old-fashioned bank accounts.

Lenders are leery of dealing with virtual-currency companies because of concerns that the businesses could run afoul of anti-money-laundering laws or be involved in illegal activities, banking executives say. Regulators and central bankers around the world have raised similar concerns in recent months.

The problem has grown so acute that some owners of fledgling virtual-currency businesses are trying to elude bank scrutiny by avoiding the words “bitcoin” or “bit” in their names, according to entrepreneurs and investors who actively track the industry.

via Banks Mostly Avoid Providing Bitcoin Services – – Article by Robin Sidel.

Workplace Loans Gain in Popularity

Sonic Drive-In restaurants around Phoenix have added a new item to their menu of workplace benefits: short-term, high-fee loans.

Arizona Restaurant Systems Inc., a Scottsdale, Ariz., company that operates 28 Sonic locations in the state, allows workers to take out loans ranging from $150 to $500 that typically last two weeks.

The fees, ranging from $8 to $25 plus interest, don’t go to the restaurant franchisee, but to a lender called Think Finance Inc., which makes the loans. Based on the fees, the loans carry an effective annual percentage rate of 100% to 165%.

Since 2010, at least half a dozen nonbank lenders have started marketing loans to companies and payroll vendors. Employer-based loan programs are now available to more than 100,000 workers, according to estimates drawn from several lenders. That number could expand to more than 10 million workers in the next few years based on projections provided by company executives.

The firms are part of a broader push by so-called shadow lenders to take a growing share of the traditional banking business. Banks have toughened their lending standards since the financial crisis, leaving small companies and individual borrowers with battered or insufficient credit histories to search elsewhere for loans.

via Workplace Loans Gain in Popularity – – Article by Andrew R. Johnson.

Banks Left Behind As Payments Go Mobile?

Banks face flat-line growth in online banking unless they can persuade customers to do more on their bank sites rather than going to billers, according to a recent Javelin report. Online banking adoption is flat because it is saturated, said Mark Schwanhausser, director of multi-channel financial services at Javelin. By 2018, 89 percent of American households will use online banking, up from 84 percent today. He suggests that banks focus on a segment he calls Digital Drifters, younger, tech-savvy customers who could be persuaded to pay bills at their financial institution. But for now, 70 percent of them prefer to pay at the biller site.

That may be because banks, said Schwanhausser, are 10 years behind.“ Banks have been sitting there on legacy services and haven’t upgraded. Right now they have to recognize how fast the whole mindset is changing. They have to adapt to providing services not only in mobile, but then they have use what they learn in mobile to reinvent and invigorate their online service.”

The trouble for bankers is that online doesn’t have a clear and attractive return on investment, he added. This is not a new story in banking; each new channel from ATM to drive-through to credit and debit cards and then online and mobile, has added costs without getting rid of other channels. Although now the decline in branch traffic has allowed banks to reduce their size and number.

“You don’t get a lot of money from it [the online channel] directly, but it is a sticky surface that keeps customers coming back. It builds relationships, but you have to justify it with a different kind of math from being able to charge someone $3.” Perhaps more to the point, a bank without online access is soon going to be struggling for business, or it will be going out of business as its remaining branch customers die off. Put these elements, such as no clear ROI together with conservative banker mentality and you can see why banks are 10 years behind, Schwanhausser added. Consumers want convenience and, perhaps, some tools to manage their money. If the bank services are clunky, their customers will go somewhere else, whether that is a biller, an aggregator or a personal financial management site.

Banking customers who use online and mobile banking and bill pay through their financial institution are the most profitable for the bank. They are also the path to the future and probably the most adept at moving accounts if they are dissatisfied. “They are defining banking for the rest of it, and if you can satisfy them, you will satisfy other customers. They are hungry for personal financial management tools, but they won’t wait around for a bank to provide them. They are as likely to look outside a bank.”

Banks have built their business on face to face interactions in the branch, but now they need to reach out through digital channels. “It’s easier to talk about big data than do it effectively,” he said. “Banks need to look at the transactions they control and see where customers are spending and where they can provide alerts and personal financial advice.” Banks can help customers save money, lock in deals, cash in a coupon or grab a refund, he said, citing BankAmeriDeals from Bank of America as an example of using customer data to deepen relationships.

via Banks Left Behind As Payments Go Mobile? – Forbes article by Tom Groenfeldt.