After numerous failed attempts and mild steps, Walmart takes its biggest leap yet in breaking into finance. In collaboration with Green Dot, the US’ biggest retailer will soon be offering ‘GoBank’, a smartphone-friendly checking account. Patrick Brusnahan reports
The lines between a prepaid card and a bank account have become even more blurred since the announcement of the team up between US retail giant Walmart and prepaid card provider GoBank.
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GoBank, which will launch nationwide by the end of October, has a few distinct traits. The key one is the absence of the fees that banks traditionally charge, including overdraft and bounced-check fees. It is being branded as a cheaper, more transparent alternative to traditional checking accounts. There’s a monthly fee of $8.95, but this can waived with a monthly direct deposit of $500 or more. In addition, while banks often utilise a scoring system to determine eligibility, GoBank allows almost anyone over 18 with an ID to open an account.
A spokesperson for Walmart said: "Traditional bank fees are just too high. We’re offering GoBank as a great option for our customers looking for an alternative to their everyday financial services."
This is the second collaboration Walmart and Green Dot have had after the Walmart MoneyCard portfolio, launched in 2006, a range of nine reloadable prepaid debit cards.
While financial institutions could be shaken by this move, some banks are not particularly worried about being undercut by the retailer. Bank of America and Citibank both released checking accounts that do not charge overdraft fees, which can cost $35 per transaction, under increasing regulatory pressure regarding the controversial fines. Despite this, Daniel Eckert, senior vice president of services for Walmart US, argued that his customers ‘feel they just aren’t getting value from traditional banking because of high fees’.
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By GlobalDataTheir target market is most likely the 10m households in the United States with little-to-no access to a traditional banking account or those who may not want one.
The features are certainly untraditional. Deposits can be made at registers of any Walmart store. Customers can also receive payroll direct debit deposit earlier than their normal payday if their employer notifies GoBank of a deposit in advance. Users can also send money instantly to each other at no charge though either e-mail or text messaging.
This is the retailer’s latest attempt to gain a foothold in the financial sector. In 2007, Walmart attempted to secure a federal bank charter and become a deposit-taking bank. This move was scorned by many in the industry and was eventually scrapped.
Ever since, Walmart has brought together a series of financial services which do not require a charter. These include Walmart’s partnership with American Express to offer a prepaid card and debit accounts two years ago and a low-fee money transfer service launched in April.
One payment option that Walmart will not be taking up is Apple Pay. While Apple has already formed partnerships with 22,000 retailers to accept payments through Apple Pay, Walmart, along with another huge chain Best Buy, has chosen another path. It decided that it would prefer to support CurrentC, another mobile payment system developed by Merchant Current Exchange (MCX), a network of retail store chains. CurrentC hopes to offer the same level of convenience as Apple Pay, but eliminating the banks and card issuers from the revenue stream.
There is no reason that merchants could not use both mobile payment systems. One example is Target. While it is a part of MCX, it will be accepting both services.
A consequence of GoBank is the effect it might have on financial institutions with branches in Walmart stores, possibly undermining them. This is made more worrisome as Walmart owns over 4% of Green Dot stock. Walmart insists that ‘it is not a Walmart checking account,’ but it could be seen as another move by America’s largest retailer to move in on the banks’ turf.
Low cost account and prepaid card alternatives
CapitalOne 360: Arguably the best option for free checking today, CapitalOne 360 offers both checking and savings accounts. The only fee you’ll face is a $25 charge for stop payments. That means no overdraft charges, no minimum balance requirements and no membership fees. The downside? You can withdraw cash at any Capital One ATM, but you can’t get service at any physical bank branches. Another drawback: You can’t deposit cash at Capital One ATMs. However, the CapitalOne 360 app does allow mobile check deposits.
Simple: Simple offers no-fee checking accounts. Customers get a break on overdraft fees, minimum balance requirements and ATM fees (except for fees the ATMs themselves might charge). A winning feature is the option to get popup notifications on your mobile device every time you make a purchase. The app lets you create a "safe to spend" balance (usually whatever cash you have leftover after bills and such) and alerts you when you’re cutting it close. It’s a handy way to keep an eye on spending and monitor your account for any fraudulent activity. There’s also a free savings account option.
Moven: Moven has all the perks of other fee-free online checking accounts. But it’s also like a budgeting tool and bank in one. Like Simple, you can get notifications for every purchase you make. But Moven takes it one step further, telling you (based on your own pre-set budget limits) how close you are to overspending in particular categories. Money transfers (free) are easy with the app, which lets you transfer cash by email, phone number or to any of your Facebook friends. They’re also part of the "pay pass" network, which means you can pay by swiping your phone at participating retailers, rather than your actual debit card.
Ally Bank: Ally Bank is not only low on fees, it also offers an interest-bearing checking account — 0.10% for accounts holding less than $15,000 and 0.60% for those carrying more. It’s not much, but at a time when interest-bearing checking accounts are all but extinct, it’s a nice plus. While it does charge an overdraft fee, at $9 per offense, it’s still a fraction of what most banks charge. They also boast one of the higher savings account interest rates out there, at 0.90% with no minimum deposit requirement.
