Finding a door into banking, Wal-Mart to offer checking accounts

By Hiroko Tabuchi and Jessica Silver Greenberg, New York Times News Service

Tuesday, Sept. 23, 2014 | 11 p.m.

Here comes Wal-Bank.

After years of thwarted efforts to break into banking, Wal-Mart is making its biggest foray yet into everyday financial services.

Wal-Mart, the nation’s largest retailer, is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts to almost anyone over 18 who passes an ID check.

Daniel Eckert, senior vice president at Wal-Mart, said Tuesday that the accounts would be available nationwide by the end of October. The accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no minimum account balance.

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

The new accounts from Green Dot, called GoBank, will cost $8.95 a month if they have direct deposits totaling less than $500 a month. Eckert said that most people on Social Security or fixed pensions would qualify.

GoBank is part of Wal-Mart’s long-running push into financial services for people with little or no access to traditional banking. In recent years, many banks have reduced services to those with weak credit. According to the Federal Deposit Insurance Corp., an estimated 10 million U.S. households do not use a bank.

Consumer advocates say that many people without checking accounts are forced into the financial hinterlands, where they have little choice but to turn to costly alternatives for basic transactions. Fees for these services can quickly add up, making saving even more difficult.

In an uneven economic recovery, Wal-Mart is also pushing to win back customers it is losing to lower-price retailers, from T.J. Maxx to dollar stores like Dollar Tree and Family Dollar. On Tuesday, the NPD Group, a market research company, said dollar stores were seeing the largest increase among brick-and-mortar retailers.

“Their core consumer, the lower-end consumer, is faring disproportionately poorly in the overall economy,” said Faye Landes, retail analyst at Cowen, an investment management group. “So anything they can do to get them back from the dollar stores and back in their own stores makes total sense.”

Wal-Mart has been eyeing financial services for some time. Two years ago, the company announced a partnership with American Express to offer a prepaid card and debit accounts. Retailers like Target and 7-Eleven also offer prepaid cards.

But the new Wal-Mart initiative will be the first full-blown, off-the-shelf checking account. To help attract customers, Wal-Mart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.

Wal-Mart tried to secure a federal bank charter to become a deposit-taking bank but abandoned that effort in 2007 in the face of opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot.