Staying on Top of Recession, Wal-Mart Adds Tesco-esque Financial Services

In the midst of a recession it is handling pretty well, Wal-Mart is establishing a financial services program for its customers with a particular emphasis on lower income consumers who might not have a checking account.

The move in financial services calls to mind Tesco in the United Kingdom, which offers insurance products, a savings program and personal loans. Tesco links financial services to store operations by offering a 50-pound gift card with car insurance, for example, and a loan payment protection plan providing, among other things, a 100-pound gift card and five Tesco.com home grocery deliveries each month that a claimant isn’t able to fulfill obligations. Wal-Mart, through its U.K. subsidiary ASDA, has had a clear view of how financial services have tied consumers to Tesco, although the breadth of its financial services have proven to have a challenging side in the economic downturn.

Wal-Mart’s plan is more focused and addresses problems confronted by an underserved demographic group former CEO Lee Scott considered at National Retail Federation convention in his final days as chief executive when he pointed out, “Twenty percent of our customers don’t have a checking account.” The lack may mean enduring long bill payment lines at utility offices and suffering exorbitant check cashing fees.

The Wal-Mart program centers on a $6 price reduction on the Walmart MoneyCard, a reloadable, pre-paid Visa debit card. Now for $3, consumers can deposit paychecks or other funds onto a card that allows them to settle bills through automated systems and to pay at stores that accept Visa debit.

Other charges apply. Reloads cost $3 and a $3 monthly fee is assessed, but that’s very competitive with fees for check cashing and bank checking services. Beyond that, direct deposits or those from paychecks transacted at Wal-Mart are not subject to the debit card reload fees, and customers who load at least $1,000 a month don’t have to shell out the periodic fee.

Wal-Mart once aspired to develop a banking business but existing financial institutions and certain members of Congress opposed the attempt, and the company eventually gave up. However, it has been adding financial services directed at certain lower income consumers including check cashing and wire transfers at prices that undercut many specialists in those businesses.

Wal-Mart is making what it can out of the recession. Just-announced fourth quarter earnings beat analyst expectations as U.S. sales gained six percent and comparables store sales advanced 2.8 percent. By adding additional financial services, Wal-Mart further positions itself as the store that’s doing what it can for hard pressed consumers even if they are employees, as workers get special deals on the cards.