There’s something to be said for persistence. Walmart refused to give up its quest to enter the banking game, and at long last it’s now officially playing.
Walmart and Green Dot Corporation recently announced the nationwide rollout of GoBank, a checking account available only on the shelves on the nation’s largest retailer. If you haven’t heard of Green Dot, they are largely known for their prepaid payment cards and they are a member of the FDIC.
So what does Walmart think it can do that traditional banks can’t or won’t? Just like Walmart promotes itself as the low-cost king in retailing, it’s sticking with that modus operandi in its foray into banking.
GoBank doesn’t charge overdraft fees, minimum balance fees or monthly fees with qualifying direct deposits. For $2.95 you purchase a starter kit and can immediately use a temporary debit MasterCard until the real thing arrives via snail mail. The monthly fee of $8.95 is waived any month you do a direct deposit of $500 or more. You can send money instantly to other GoBank users via text or email.
There is a 3% foreign transaction fee and out-of-network ATM fees (typically $2.50 for an out-of-network ATM plus any fee the ATM owner may assess). Walmart says though it will have a network of 42,000 free ATMs.
Leave it to Walmart to be creative. GoBank offers early payroll direct deposit so customers can get their paycheck deposited earlier than their normal payday if their employer notifies GoBank of a deposit in advance.
Then there’s the "Fortune Teller" feature. "Remember that time you won the lottery? I don’t either." This is the response a customer might see from GoBank’s "Fortune Teller," if they try to spend beyond their budget. "Fortune Teller" crosschecks the price of an item with a customer’s planned income and expenses, and if they can’t afford it, they’ll be advised in real-time to pass on the purchase.
"No other checking account makes it this easy and affordable to manage your everyday finances. GoBank is breaking down the barriers to traditional banking and brings the benefits of a FDIC-insured checking account that’s loaded with features to a large segment of Americans," Steve Streit, founder and CEO of Green Dot Corporation and chairman of Green Dot Bank, said at the time the product was announced.
What does all this portend?
"Walmart’s backdoor entry into banking, after many years of trying and failing to breach the wall between banking and commerce, could be very disruptive to banking in the long run," says Edmund Mierzwinski, consumer program director for U.S. PIRG. "In the short run, however, it could force the often lethargic banking players to more quickly adopt some of the pro-consumer features the Walmart GoBank account provides."
While many banks advertise a free checking account, "The GoBank checking account is about as fee-free as it gets," says David Bakke, a financial columnist for MoneyCrashers.com. The account is also available to anyone over 18 who has identification.
"This is a wake-up call for the banking industry that days of charging high fees for checking accounts may be over," says Bakke. People pay on average about $30 in overdraft fees and minimum balance fees are typically about $10. "If the GoBank option gains traction, which is very likely in my opinion, other big banks will have to adjust or eliminate such fees if they want to remain competitive."
For sure, the move has created buzz in the banking industry. "This presents a threat and opportunity. If consumers compare Walmart to the services offered by a community bank, consumers will see that they come out on top with a bank," says Viveca Ware, executive vice president, regulatory policy for the Independent Community Bankers of America. "Community banks offer a superior relationship model. For Walmart, banking is an ancillary product. We have banking expertise. When you go to Walmart will it be the cashier or customer service who services your account?" she asks.
Remember too, says Mierzwinski, "Walmart’s real mission is to help Walmart. They are counting on consumers using these accounts to spend more in their stores, further, with a captive bank, Walmart will also increase profits by paying fewer, ‘swipe’ or interchange fees to other banks, because presumably fewer customers will use cards from other banks. The vast bulk of typical 2-3% swipe fees on credit and debit transactions accrues to the cardholder’s bank."
There won’t be physical bank branches. This is a mobile banking option only, which could limit the interest of those in an older demographic.
However, says Bakke, "There aren’t many disadvantages to the GoBank checking account."