LAKE FOREST, Ill.—Walmart’s entry into checking signals a new competitive period for the service, but credit union have some competitive advantages over the retailing giant, according to one analyst.
Michael Moebs, economist and CEO at Moebs $ervices, said one area where Walmart is leveraging its brand is a bit of an elbow to the ribs of a traditional CU strength. “If you don’t trust banks, you do trust Walmart. That is the message Walmart is promoting,” said Moebs.
But the traditional Walmart strength, pricing, is not a cornerstone of its new financial product. Moebs pointed to the features of the account that is offered through Green Dot Bank that will drive a shift in pricing, including start-up fee of $2.95, direct deposit of $500 or more required to avoid monthly fee, no paper checks, hefty charges on out-of-country transactions, no overdrafts allowed, a fee for for cash withdraws, and no joint accounts.
“Walmart checking can be limiting with heavy charges for non-conformists,” added Moebs.
Moebs believes credit unions can battle the new account and win. “As with all new depository offerings of transaction accounts, savings accounts and loans there are ways to beat or defeat what is offered,” said Moebs.
Moebs suggested maintaining free checking, continuing to allow overdrafts, offer at least one account using paper checks, have joint accounts for all checking, allow account openings online or in-person, accept deposits from any depository or legitimate source and pay interest on at least one checking account.
“Using basic pricing techniques, such as relationship pricing, there are ways to counter Walmart checking,” said Moebs. “Avoiding conditions on fees, balances or rates is another approach.”
Moebs said that like Apple and Starbucks, Walmart would like to become or own a bank. “Their reasons are solid: reduce costs and make payment of goods and services seamless,” he explained. “The optimal competitive response is to keep costs, especially transaction expenses, low, payments easy to do, and security along with personal integrity top-notch.”
Moebs added that Walmart’s features can be incorporated into financial institutions’ checking.
“As with past changes in paper checking, debit cards, credit cards, and internet transactions, what Walmart is doing can be competitively addressed and the business of checking can go on at all banks, thrifts and credit unions.”