Wal-Mart, Go Bank target unbanked clients

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After years of trying and failing to break into banking, Wal-Mart is extending its low prices and expansive retail footprint to checking accounts through an exclusive distribution of Green Dot Corp.’s Go Bank.

The product could threaten sales of prepaid cards and activity at in-store branches.

“Many so-called ‘free’ checking accounts aren’t really free because they have high overdraft fees,” said Steve Streit, founder and CEO of Green Dot and chairman of Green Dot Bank. “In fact, an independent study by Bretton Woods estimates that consumers pay approximately $218 to $314 per year for a basic checking account.”

Some may ask, “Will Wal-Mart’s new checking account product create a competitive challenge for the financial services industry in Las Vegas?” A senior financial analyst doesn’t think checking accounts pose a risk to traditional financial institutions, at least not right away.

“If Wal-Mart and Go Bank add further products, that could be more of a threat than this initial offer,” Bankrate.com senior financial analyst Greg McBride said in a phone interview. “It’s geared toward consumers who can’t get or don’t want an account at a bank or credit union.”

McBride said the product is also geared toward consumers with a history of overdrafts. He also included the unbanked and underbanked as potential customers. Both categories are well represented in Southern Nevada. According to the Federal Deposit Insurance Corp., 7.5 percent of Nevadans are unbanked and 31.2 percent are categorized as underbanked.

One Nevada Credit Union President and CEO Brad Beal said Wal-Mart’s new checking account offering “adds yet another competitor to an already crowded marketplace.”

“While we never underestimate any competitor, the many benefits of One Nevada’s checking products will continue to serve our members well,” Beal said by email. “We do not anticipate any changes to our product design or pricings.”

One Nevada Credit Union is a $703 million-, 75,190-member credit union based in Las Vegas. The credit union has 14 branches in Clark, Washoe and Nye counties, with zero in-store branches.

Wells Fargo &Co, has eight in-store branches with Wal-Mart nationwide. The business with Wal-Mart represents a small portion of the bank’s overall footprint in the United States. To Wells Fargo, Wal-Mart represents $90.4 million in total deposits, and 0.13 percent of its total branches. Wells Fargo operates 6,270 branches with $971.9 million in deposits at the end of 2013.

Tony Timmons, Wells Fargo’s assistant vice president corporate communications in Las Vegas, said none of Wells Fargo’s 119 branches in Nevada were inside a Wal-Mart store. Timmons also said “it is really too early to speculate on this product at this time.”

SNL Financial, a Charlottesville, Va., financial data company, reports that U.S. Bank parent U.S. Bancorp and JPMorgan Chase &Co. also operate in-store branches with Wal-Mart. U.S. Bank has 32 nationwide and none in Las Vegas, according to a branch listing on the bank’s website. Chase has five branches in Wal-Marts nationwide, but no Wal-Mart branches in Las Vegas.

Wal-Mart and Go Bank expect the checking account’s fee structure to appeal to consumers.

Go Bank’s fee structure is simple and includes a $2.95 cost of the starter kit and linked MasterCard Inc. debit card and an $8.95 monthly maintenance fee that can be waived with $500 in qualifying direct deposits. The account does not charge fees for overdrafts or minimum balances.

In comparison, Citibank charges customers with basic checking accounts $12 for returned checks and $34 for overdrafts.

Bankrate.com’s 2013 Credit Union Checking Survey showed 72 percent of credit union checking accounts remain free, down just six percentage points in 2010. The percentage of free checking accounts at banks, however, dropped from 65 percent in 2010 to 39 percent in 2012, according to Bankrate.com.

“If your goal is a free checking account, you don’t need to go to Wal-Mart,” McBride said.

Neither ChexSystems’ score nor credit bureau ratings will be used to determine customer eligibility for the checking account. In statement, Wal-Mart said Go Bank will use “proprietary underwriting techniques” to allow almost any consumer who passes ID verification to open an account.

McBride said Wal-Mart was marketing the product for Go Bank, and it was similar to in-store bank or credit union branches in Wal-Marts or supermarkets. He said the accounts are insured by the Federal Deposit Insurance Corp.

The accounts can also be accessed by cellphone, and include mobile check depositing, online bill pay, personal budgeting tools, person-to-person money transfers to other Go Bank customers, and more than 42,000 in-network ATMs for withdrawing cash.

The accounts don’t earn interest, and offer an “early payroll” feature, which lets customers with direct deposit start spending their payroll funds up to two days before the money arrives in the account.

Go Bank also requires all disputes to be resolved by binding arbitration.

Other fees include a 3 percent foreign transaction fee and out-of-network ATM fees. Typically, banks charge $2.50 for an out-of-network ATM plus any fee the ATM owner may assess.

McBride said Wal-Mart has longed to enter financial services for some time, He said the retailer tried to obtain its own banking license in 2007, but withdrew the idea after resistance from lawmakers, regulators and the banking industry.

The Bentonville, Ark.-based retail giant already offers money transfers, cashes checks and sells prepaid debit cards. In 2012, Wal-Mart announced a partnership with American Express to offer a prepaid card and debit accounts. Retailers like Target and 7-Eleven also offer prepaid cards throughout Southern Nevada.

Will Target or 7-Eleven in Las Vegas also begin to offer low-cost checking accounts? Perhaps, McBride said, but it will hinge on the success of Go Bank’s checking accounts at Wal-Mart.

“What’s in it for Wal-Mart?” McBride asked. “An entire store full of merchandise that they can cross-sell.”

McBride said the goal is to boost traffic in its stores and ultimately boost sales.

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■ Hale and healthy: Two Nevada financial institutions were cited by despositaccounts.com as being among the 200 healthiest in the United States.

The two, Meadows Bank and One Nevada Credit Union, made the list based on the website’s overview criteria. Meadows Bank was ranked No. 53; One Nevada Credit Union was ranked No. 82.

The Top 200 Healthiest Banks/Credit Unions is an evaluation of 14,000 banks and credit unions in the United States.

Depositaccounts.com grades each bank on capitalization, deposit growth and loan-to-reserve ratio, The data generate a comprehensive health grade, A through F.

The analysis pegged all the bank failures in 2013 as being in the bottom 2.5 percent of the health rating, Failures resulted in 6,500 banks closing or being acquired by other institutions.

The top four U.S. banks — JP Morgan Chase &Co., Bank of America, Wells Fargo &Co. and CitiBank — all received A+, A or B+ ratings from depositaccounts.com. The nation’s healthiest bank is Malaga Bank in Palos Verdes Estates, Calif.

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