Wal-Mart is eager to act as a bank alternative for its customers -- and reduce the amount of money it pays to handle debit and credit cards in the process.
On Tuesday, Wal-Mart announced the Direct2Cash service that allows customers to more easily avoid the bank. Customers can now get their tax refunds in cash at Wal-Mart.
Wal-Mart is working with Green Dot Co.'s Tax Products Group and Republic Bank & Trust. The service will be available at Wal-Mart stores and other locations.
"We know tax refunds can be one of the largest financial payouts of the year for many of our customers, and the last thing they want is to wait for their refund check to arrive and then spend money on unnecessary fees -- in many cases upwards of $70 -- to cash it," said Daniel Eckert, senior vice president of services for Wal-Mart U.S.
He said the average taxpayer will receive a $2,900 check from the government. Customers will pay a maximum of $7 to the tax preparer to use the service. Wal-Mart isn't charging anything.
Handing customers a stack of cash in a Wal-Mart store isn't a bad idea for the retailer, said Randy Koontz, first vice president of investments for Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers.
"I'm sure they've run the metrics," Koontz said. "If they hand out $2,000 in cash, the customer's going to get a cart."
But analysts say Direct2Cash is part of a larger strategy to act as an alternative to banks. Wal-Mart said in an April news release announcing the Walmart-2-Walmart money transfer service that about 28 percent of Americans are "underbanked or unbanked."
"Wal-Mart is building a financial ecosystem for customers that tend to be underserved or customers who tend to get price-gouged" for financial services, said Carol Spieckerman, president of the Bentonville retail strategy firm newmarketbuilders. "Of course, the benefit to Wal-Mart is that it keeps those customers and tends to bring more customers into its ecosystem."
In 2012, the company partnered with American Express to develop the Bluebird money card. Last year, Wal-Mart began offering banking services through Green Dot Bank and rolled out Walmart-2-Walmart money transfers. Currently, the company is helping to develop an app to compete with Apple Pay called CurrenC, a smartphone app in beta.
The app withdraws money directly from users' bank accounts without going through a debit or credit card.
Accepting Apple Pay means paying fees to the banks Apple has partnered with and to Apple itself.
"When your revenue is in the hundreds of billions of dollars, the swipe fees add up into a big chunk of money," Koontz said.
The National Retail Federation said Tuesday that the U.S. Supreme Court would not review an appellate court ruling that left intact the cap on swipe fees set by the Federal Reserve.
Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Fed was required to adopt regulations that would result in debit swipe fees that were "reasonable and proportional" to the actual cost of processing a transaction, the retailers group said.
The Fed set the limit at 21 cents. The retailers group said the average was 45 cents before the cap. The group was pushing for a cap closer to 12 cents per swipe.
"I think that's why payment services is such fertile ground and why Wal-Mart has created partnerships with American Express and is looking at ways to get around paying those swipe fees," Spieckerman said. "Right now, they're playing ball with the enemy."
Business on 01/21/2015