Last Updated Aug 20, 2007 6:51 PM EDT
Much of what Wal-Mart announced today [pre-paid money cards and new money centers] will be directed at consumers who do not use banks. Wal-Mart says, for example, that 20 percent of its customers -- about 36 million people -- do not have checking accounts. The stored-value cards, which can be reloaded, will cater to such consumers, giving Wal-Mart a foothold on turf long desired by the big banks. The so-called Wal-Mart Money Card, to be issued with GE Money, a division of General Electric, would allow customers to transfer their paychecks directly onto their cards, make purchases through the Visa network, pay bills, or withdraw cash from A.T.M.'s.
Customers who use the cards can avoid carrying cash and do not need the legal documentation required for opening traditional bank accounts. There are no overdraft fees because card holders cannot spend more than the value stored on the card. With such a card, Wal-Mart shoppers without bank accounts can "finally take advantage of more mainstream financial services," Ms. Thompson said. Analysts said there was ample evidence that Wal-Mart would lower the costs of banking in the United States. Company executives said the chain had already cut the cost of cashing checks by 50 percent, and its financial services had saved customers $245 million last year.With the GE partnership and this new line-up of financial services, it seems that Bair was right when she said "They don't need an ILC to play an important role in expanding access to financial services, they can do so by partnering with banks and others." And by forcing Wal-Mart to partner with a lending institution instead of owning one, the FDIC has ensured that the monolith doesn't have the chance to wield supply chain and financial power over its business partners. (For more on the supply chain-finance conflict of interest, see this FDIC transcript.)