June 20, 2007 / 11:18 AM / 12 years ago

Wal-Mart expanding financial services

NEW YORK (Reuters) - Wal-Mart Stores Inc. said on Wednesday it will open 1,000 financial services centers in its stores and roll out a prepaid Visa debit card nationwide in a major push to sell more financial services to its lower-income shoppers.

Jane Thompson, President of Wal-Mart Financial Services, speaks during the Reuters Retail and Consumer Summit in New York June 20, 2007. REUTERS/Brendan McDermid

The world’s largest retailer said the expansion will help it reach the 73 million Americans who do not have bank accounts or access to credit cards, and are largely ignored by banks.

“I think in the financial industry this is a game-changer for the market that people aren’t serving,” said Jane Thompson, president of Wal-Mart financial services, at the Reuters Consumer and Retail Summit in New York.

The moves come three months after Wal-Mart withdrew an application with U.S. bank regulators to operate a specialty bank after it faced immense opposition. Instead, it said it would focus on launching new financial services in its stores.

Thompson told the Reuters Summit that the retailer hopes to announce two new products before the year is over and has about four products “in the hopper.”

She said it was too early to decide whether Wal-Mart will offer mortgages and home equity lines of credit, but she said Wal-Mart is exploring ways to partner with a bank to link a savings account to the prepaid Visa card.

“We’re working on it,” she said, although the efforts are “very early.”

MORE MONEYCENTERS

Wal-Mart said it will double the current number of Wal-Mart MoneyCenters in its stores to 450 by the end of this year and will open 1,000 centers by the end of 2008 — meaning it will have a center in one-fourth of its U.S. stores.

The centers offer consumers services like check cashing, money orders, bill payment and money transfers.

“We’ll keep adding them,” she told a conference call with reporters. “I know 1,000 is not all we’ll have.”

The retailer is also rolling out the Wal-Mart MoneyCard, a reloadable prepaid Visa, that it is launching nationally with GE Money and Green Dot.

The card will be introduced to roughly 1,300 Wal-Mart stores by the end of June and will be available at most Wal-Mart stores by year’s end. Consumers will be able to put money on the card and then use it at other stores, gas stations or anywhere a Visa would be accepted.

The card came out of a pilot program Wal-Mart tested in the fall under the name Wal-Mart Prepaid Visa Card. But Thompson said the retailer would probably link more financial services to the card and did not want to be confined by having the word “prepaid” in its name.

She also said Wal-Mart has left the “door open” to working with other networks, like MasterCard (MA.N) or Discover, for future cards.

REPEAT CUSTOMERS

Thompson said the retailer does not see the services, like the prepaid card, as a means to attract new customers to its stores.

Instead, she expects them to bring Wal-Mart’s current customers into its store more frequently and have them spend more money while they are there, she told the Reuters Summit.

Wal-Mart is working to improve its U.S. same-store sales, which last fiscal year rang up their smallest gain since the retailer began reporting such figures in 1980.

It has also said this year could be a challenging one as its base of lower-income shoppers feel the pinch from rising gasoline prices.

Thompson said the financial services division, which it started about five years ago, is a profitable one, and she expects growth of 30 percent to 40 percent year over year.

She also said the retailer does not plan to resubmit a bank application with the Federal Deposit Insurance Corp. following its decision in March to withdraw its application.

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“It’s really not on our list,” she told the Reuters Summit.

Wal-Mart had insisted it wanted to use the specialty bank to save money by processing credit-card and check transactions internally. But consumer groups and banks protested, fearing the retailer would eventually provide other retail banking services, leading to the demise of community banks.

“It’s so much better to be out there launching products to our customers that add value,” Thompson said. “I’m personally glad to have it behind me. We learned a lot. We still think we would have been a good bank owner.”

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