June 14, 2011

New Wal-Mart Kiosks Present Threat to Banks

Wal-Mart Stores Inc., the nonbank that banks love to hate -- and fear -- is at it again. The retailer next week will begin rolling out automated versions of its MoneyCenter offices, which provide a range of financial services to shoppers.

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The "MoneyCenter in a box" concept will feature ATM-like machines positioned in Wal-Mart stores that do not have full MoneyCenters, said Jane Thompson, the outgoing president of Wal-Mart's financial services unit.

Though the move might seem less ambitious than Wal-Mart's other forays in banking, competitors should take it seriously.

"Retailers should shake in their boots, banks should shake in their boots," said Brian Riley, a research director in the bank cards practice at TowerGroup. "Because if Wal-Mart starts linking their kiosks to doing reloadable gift cards, they have the power to move a lot of transaction money."

Thompson would not say exactly how many express MoneyCenters will be part of the pilot program, and was reluctant to reveal locations to rivals.

"It's going to be kind of like 'Where's Waldo' — you'll have to find them," she said during the 6th Annual Underbanked Financial Services Forum in New Orleans held by American Banker and the Center for Financial Services Innovation.

A Wal-Mart spokesman did not immediately respond to requests for further details.

Wal-Mart has more than 1,000 MoneyCenters throughout the country that provide check cashing, bill payment, wire transfers and other services. Manned by customer service agents, they are one of the most profitable areas in Wal-Mart stores, Thompson said.

Companies with a hand in financial services have been trying to encourage self-service as a way to control labor costs, while potentially keeping longer store hours. Kiosks are also a way to blend Internet banking and financial services functions with shopping in the physical world.

"If you take a Wal-Mart shopper, if maybe they want to buy a washing machine and they want to transfer funds online without having to get to their home computer, or maybe they don't have easy Internet access, they can do that now within a Wal-Mart," said James Van Dyke, the president of Javelin Strategy and Research. "It makes a lot of sense for a limited segment of the population."

Wal-Mart, the world's largest retailer, has campaigned for years for cheaper banking services. It has battled with card networks and banks over interchange fees and stands to be one of the biggest beneficiaries of the pending regulatory caps on debit interchange from the Dodd-Frank Act.

It scrapped an application to charter an industrial bank in 2007 amid industry opposition. Today Wal-Mart is one of the top sellers of prepaid cards, through a partnership with General Electric Co.'s GE Money and Green Dot Corp.

More traditional financial services companies see value in kiosks, too. NCR Corp., the country's largest maker of automated teller machines, plans to announce a line of kiosks next week. The Duluth, Ga., company said the kiosks — called SerlfServ4 and SelfServ 8 — will allow users to open up accounts, check balances and buy financial products.

Though the device are being marketed to retail banking companies, it's not far-fetched to imagine them in stores.

"We are talking to a couple of banks in Western Europe who are looking to do mini-branch concepts with retailers," said Carol Hamilton, a global marketing manager at NCR. Shoppers could use the kiosks to do their Internet banking, pay credit card bills and print statements.

Abroad, some companies have already leveraged NCR's ATMs to allow their customers to deposit cash for bill pay. In Singapore, an NCR spokesman said, one bank is using its ATMs to load cash on chip-enabled mobile phones that can be used to buy transit tickets.

Nexxo Financial Corp. of San Bruno, Calif. makes kiosks that can be used to load prepaid cards with cash, checks or money orders. The devices also allow bill pay and cash withdrawal.

Most of those kiosks are in "local, Hispanic-oriented retailers," said David Alvarez, Nexxo's chief executive. "From a retailer, or a banker, perspective, the No.1 attraction is the traffic," he said. "If you put this array of services in your retail establishment … having the cash ready to spend is a tremendous advantage."

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Posted by staff at June 14, 2011 12:59 PM