Wal-Mart's Expansion Into Financial Services

Can Wal-Mart Cash In On Financial Services?

• Summary: Over the last few years Wal-Mart has been able to expand its financial services business in areas that don't require acceptance of deposits and thus don't require a banking license. Though they currently account for a minute proportion of Wal-Mart's revenue, it processes 1.5-2 million money-services transactions per week. It offers check cashing, bill payment, money orders and wire transfers, the latter via a partnership with MoneyGram International Inc. Wal-Mart significantly undercuts the competition, offering check cashing for $3 and money orders for 46 cents. It has aggressive plans to expand its financial services business, and is still waiting for approval of its plans to obtain an industrial bank charter in Utah and federal deposit insurance. Wal-Mart says it wants the approvals to process its own credit card transactions, not to offer retail banking services. Wal-Mart's attempt to expand its money-services business is being opposed in various states by competitors.
• Comment on related stocks/ETFs: Financial services represent a profitable growth opportunity for Wal-Mart and a threat to potential competitors. Stocks mentioned in the article that could be impacted: First Data Corp (FDC), which owns Western Union, and Ace Cash Express Inc. (AACE), which operates check cashing stores in 38 states. Wal-Mart's expansion of its money-services business could benefit partner MoneyGram International (MGI).