After years of thwarted efforts to break into banking, Wal-mart, the nation’s largest retailer, is making its biggest foray yet into everyday financial services. Wednesday, Wal-Mart and prepaid card provider Green Dot launched GoBank, a mobile-first checking account that aims to serve the nation’s unbanked and under-banked.
According to the Federal Deposit Insurance Corporation, an estimated 10 million households in the United States do not use a bank. Consumer advocates say that many people without checking accounts have little choice but to turn to costly alternatives for basic transactions. Fees for these services can quickly add up, making saving even more difficult.
The Wal-Mart accounts will have no minimum balance, no overdraft fees will be charged, and account holders will gain access to 42,000 free ATMs. At $8.95 a month (plus $2.95 for a “starter kit” purchased at a Wal-mart store), GoBank is not the cheapest checking account around; but the monthly fee will be waived for customers who set up a direct deposit of $500 or more. Most people on Social Security or fixed pensions would qualify.
According to Green Dot Steve Streit, an independent Bretton Woods study found that customers pay approximately $218 to $314 annually for a basic checking account. That means even folks paying GoBank’s monthly fee ($107.40 annually) should come out ahead.
Daniel Eckert, senior vice president of services for Wal-mart U.S. said, “Walmart customers want easier ways to manage their everyday finances and increasingly feel they just aren’t getting value from traditional banking because of high fees.”
Eckert added that the accounts would be available nationwide by the end of October. The accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no minimum account balance.
To help attract customers, Wal-mart and Green Dot will forgo a screening system many financial institutions use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.
In the past, Wal-mart has tried to secure a federal bank charter to become a deposit-taking bank but abandoned that effort in 2007 due to opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot.