How Walmart uses money services to grow sales
Walmart is using money services to lock in customers, grow sales, and stave off e-commerce rivals.
The retailer offers its customers menu of money services that includes on-site check cashing, bill payments, money-transfer services and prepaid cards. It announced last week that its MoneyCard platform — a prepaid card and budgeting tool accessible through an app and a website — saved its customers $2 billion since its inception two years ago.
Walmart wants to offer money services to customers who may rely less on traditional financial services companies like banks, and may not qualify for high-earning cash-back credit cards (MoneyCard offers 3 percent cash back on online purchases, 2 percent at Murphy USA and Walmart fuel stations, and 1 percent cash back in stores). It lowers barriers to banking to underbanked customers, and competes with other retailers looking to grab a piece of this market. It also competes with payday-advance companies by letting customers who set up direct deposit access their pay checks up to two days early.
Walmart wouldn’t comment on whether it’s resulted in a sales lift; a company spokesperson said the services are being offered to add convenience. Steven Streit, CEO of Green Dot, the financial services company that’s partnering with Walmart on MoneyCard, told investors in a February earnings call that Walmart owns the commission from the use of the MoneyCards and has increased sales in stores and online.
The MoneyCard savings milestone marks Walmart’s slow march to drive customers to its ecosystem through financial services tools. The company recently launched a purchase financing option through startup Affirm in late February. Money services help Walmart position itself as a full-service retail and financial center for its customers — a tool to encourage customers to come to stores and make more purchases at Walmart.
This is especially important as its closest e-commerce rival, Amazon, aims for lower-income and underbanked customers through discount programs and prepaid cards that are reloadable at physical retail locations.
Walmart currently offers three types of financial products: its in-store money centers operate as quasi-banks, offering on-site services to grow in-store traffic. These include check printing, check cashing, international money-transfer services, money orders, tax preparation services, and bill-payment services. It offers prepaid debit cards that include cash back and savings “vaults” reminiscent of online banking tools, along with credit cards and point-of-sale financing through Affirm.
Through money services, Walmart isn’t quite aiming to take on banks, but it’s encouraging lower-income and underbanked customers to save through digital savings tools and cash-back offers, and ultimately direct that spending toward Walmart purchases.
“The idea of being able to go to one place to get everything done — whether digitally or physically — is the strategy they’re working on,” said Aite Group senior analyst Kevin Morrison.
Amazon has slowly moved into Walmart’s turf through a prepaid card (Amazon Cash) launched two years ago that can be topped up at retail locations and reports it’s opening grocery stores aimed at lower-income customers. Amazon Cash lets customers top up their Amazon balances at more than 30,000 participating retail stores, including popular chains like CVS, Gamestop and 7-Eleven. While money services are a means to keep underbanked customers inside Walmart’s ecosystem and ultimately spend their dollars there, it’s also a broader branding play, argues Jonathan Smalley, CEO of data analytics company Yaguara.
“It’s helpful as opposed to predatory — in the context of the Walmart versus Amazon race, it’s a huge opportunity for Walmart to say ‘look we’re not just trying to increase our bottom line, and we genuinely care about our customers,'” he said.
The challenge, however, will be to continue to keep customers’ interest, particularly as other retailers grow their loyalty programs and financial products for customers.
“Walmart is feeling they have to do something in this area, and the challenge is making sure the product offerings are relevant — for a lot of consumers they’re not, and they don’t want loads of cards,” said Neil Saunders, managing director of GlobalData Retail.
Subscribe to the Digiday Retail Briefing: An email with news, quotes and stats covering the modernization of retail and e-commerce, delivered three times per week.
Member ExclusiveDespite hungry VCs, DTC brands are rethinking their fundraising approach
This is the latest installment of the DTC Briefing, a weekly Modern Retail column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. Join Modern Retail+ to get access to the DTC briefing–as well as all articles, research and more. Before 2020, some founders and investors were starting to warn that most consumer […]
Member ExclusiveA cautionary tale: What the FTC’s attempt to block P&G’s Billie acquisition means for CPG startups
Thanks to record e-commerce sales, it’s been a good year for direct-to-consumer founders. Except, maybe, for founders of direct-to-consumer razor startups.
Member ExclusiveDTC brands are preparing for nightmare holiday shipping delays and out of stocks
After surviving the Black Friday rush, direct-to-consumer brands have a new challenge at hand: how to ensure their holiday sales aren't hampered by long shipping delays and going out of stock on certain items
SponsoredHow audio programmatic is unlocking ‘screen-free’ campaigns
In recent years there has been rapid growth in audio content available for streaming. Last year, 2020 was a particularly big moment for audio growth, one characterized by a massive shift in lifestyle. Many adults went from commuting to an office to working from home. As a result, they developed new habits and preferences. One […]
Member ExclusiveDTC brands aren’t feeling the Black Friday pressure
In the five days following Thanksgiving, there's usually a wave of retailers offering anywhere from 20% to 50% off of their products. This year, that wave will feel more like a never-ending tsunami.
Member ExclusiveAs its ecosystem grows, companies are becoming reliant on Shopify for more parts of their business
Eight years ago, startups turned to Shopify primarily to sell products online. Now, a startup might turn to Shopify to help fulfill orders, get some cash for their business or use its point-of-sale system when it opens a physical store.