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Online Extra: Serving the Unbanked "Plays to Our DNA"


While Wal-Mart (WMT) has been blocked by federal and state regulators from exercising true bank-like powers, the retail giant hasn't given up its ambitions of being a player in financial services. For the past two years, it has been stepping up its efforts to peddle such "basic money services" as low-price wire transfers, check cashing, and express bill paying.

The retailer's financial-services president, Jane J. Thompson, talked to BusinessWeek Dallas Bureau Chief Wendy Zellner recently at a Wal-Mart supercenter in Fayetteville, Ark., about the unit's progress and its strategy. Here are edited excerpts of their conversation:

Q: Do you still see the "unbanked" and "underbanked" as your primary target?

A: Very much so. It plays to our DNA. It's part of what [founder] Sam [Walton] started. Sam provided great prices in communities and access. Even more than the money, that's what gets [Wal-Mart's] people excited -- we're helping this customer.

Q: What's more important: The potential income from financial services or the traffic and the synergies with the retail side?

A: [CEO] Lee [Scott] will say it's really about the traffic -- if we didn't make any money that would be O.K. But then when I come up to my quarterly numbers, he doesn't say that.

It's actually tricky to find a partner that wants to do this. [Wal-Mart works with partners like MoneyGram International and Certegy to handle its check-cashing, money orders, and other services.] There are some leaders in the industry that don't want to hurt their margins and don't want to work with us. [But they're coming] back now because they know some of these contracts are coming up, and they're trying to get in. You'd better know right now when you come to see us that we're not raising our price. We'll be looking at lowering them.

Q: Can you give any kind of parameters on how big this business is for Wal-Mart?

A: We're probably doing over a million transactions [in basic money services] a week, not counting credit cards. It's pretty rapid growth. We're saving over a million dollars every week for customers.

Q: Why would someone want to be your partner, given that you might be driving down their margins?

A: They see this kind of [rapid] growth. We're their growth story. And we see these transactions growing.

Two years ago we were hardly doing anything. We had money orders two years ago. When I first came [in May, 2002,] we were just rolling out money transfers. Then we rolled out payroll-check cashing. Now we're doing a million transactions a week.

Q: What's the potential for this business? Will it ever be more than a rounding error for Wal-Mart?

A: We would aspire to show up on some earnings-per-share measure some day. For some [companies] a million transactions would blow them away. For us it's 1% of the [weekly] customer count.

We've done some marketing, Hispanic marketing, to let people know [about the services] with radio and print and billboards and busboards in selected cities. But generally it's just word of mouth. It's something that just gradually grows. It's probably good for all of us that it's happening that way.

Q: What's next? What other basic services do you think you'll add?

A: We have a few things up our sleeves, but we won't really announce them until next year.

Q: In the past, you've tried to buy a bank or industrial loan company. If regulations would allow it, would that still be the preferable way? Would you want to own a bank if you could?

A: Never say never. But our strategy is what you see. You see that we're signing long-term contracts with community banks [which operate branches in more than 1,000 Wal-Mart stores]. This is right up our alley [of] taking care of these underserved customers, giving them great value.

Q: So this strategy is not a placeholder?

A: No, we're getting great traction, great growth, great momentum.


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