Wal-Mart Money Centers, present in nearly 875 stores, offer products designed to reach low- and moderate-income clientele. Could the centers be bad for credit unions with in-store branches?
Synergistics Research Corp. CEO William McCracken thinks so. He warned credit unions and banks that the Money Center model "poses a competitive threat because of the degree of comfort it provides to a segment of consumers" who do not use basic banking services like checking but make frequent visits to the stores and are more comfortable with reloadable plastic.
McCracken said he knows of a number of banks that have closed their Wal-Mart branches because they were not getting enough foot traffic, with potential customers "going next door to the Money Center."
Envision Credit Union, based in Tallahassee, Fla., has had mixed luck with its Wal-Mart branches. Senior Vice President Al Hammock said one branch had a lot of traffic, deposit volume and transactions, but no loans. Therefore, the credit union decided in June to consolidate it with one of its traditional branches and is considering doing the same with another in-store branch.
However, Hammock said Envision's Wal-Mart branch in Crawfordville, Fla., "is doing just great and is building membership."
Another Florida credit union, Miramar-based Tropical Financial, said it is enjoying a supportive spirit from Wal-Mart, as well as healthy profits. "The break even for a Wal-Mart branch is $12 million, but we have seen volume reach to $30 million," President/CEO Gregory Blount said. However, similar to Envision's situation, "Loan demand is not where we would like it to be right now."
For Desert Schools Federal Credit Union in Phoenix, the forecast for its 25 Wal-Mart branches is sunny-with a chance of rain. A spokesman for the credit union said it has maintained "excellent relations" with the retailer over the years but recently has noticed "crossover" money order competition, with 1% of business drawn away to the retailer.
As for the Money Centers themselves, business is booming. The Central Penn Business Journal reported that sales of the Money Center MoneyCard, a Visa-branded debit card, nearly tripled after its upfront price was reduced from $8.94 to $3.00. "We are on track to have more than two million that we've sold this year," Wal-Mart Financial Services President Jane Thompson told the paper.
She doesn't believe Wal-Mart is in direct competition with banks; customers will simply go where they feel most comfortable. "I think we're also understanding the needs of customers that are living paycheck to paycheck better than anyone else," Thompson said.