By Ray Birch
LAKE FOREST, Ill.—Walmart will achieve “market dominance” in checking in less than a decade, according to one economist who has been urging credit unions to protect their consumer checking business from a big assault by the giant retailer and the benefits it offers.
“Walmart is opening about 9,000 checking accounts per day nationwide,” said Michael Moebs, economist and CEO at Moebs $ervices, who in a previous CUtoday.info story was the first to report that the big-box retailer has more than 100 million consumer checking accounts across the nation. “With Walmart’s 101-plus-million accounts, banking behemoth BofA is second with 68 million accounts.”
Is it possible for Walmart to gain an even larger lead on all financial institutions in the coming years? Moebs says the data make it clear (see table below) the answer is yes.
“There are more than 873-million checking accounts in the nation. Walmart ranks number-one with an 11.6% market share. Bank of America is second with 7.8%. Take out business accounts, most of which are self-employed and small businesses, and five out of eight accounts are consumer,” Moebs said. “Of only all consumer accounts, Walmart has 18.7% share. Reduce consumer FIs to those with one million or more checking accounts and Walmart has 25.3% market share. This is something credit unions must pay close attention to and many must make adjustments to their pricing.”
A New Record
Moebs, whose firm has been analyzing checking data for 39 years, emphasized that never before in U.S. history has one checking source held this many checking accounts nationwide.
“At Walmart’s rate of growth, they will achieve dominate national market share in this decade,” Moebs predicted.
Why is Walmart such a formidable player in the checking space? In Moebs’ view, much of the reason comes down to the retailer’s marketing muscle and the consumer experience delivered with its Money Card.
Moebs said it very clear the features of the Money Card contrast (see list below) with the typical depository checking account—which FIs should pay attention to—and that the retailer has other advantages.
The Advantages
Those advantages include:
- With direct deposit Walmart’s Money Card is free—less than 20% of all banks, credit unions and thrifts are offering free checking
- $15 OD fee vs. $30 median for all depositories
- $200 OD limit vs. $600 at most financial institutions
- De minimis in line with banks, CUs, and thrifts
- Less than 10% of all financial institutions offer a grace period—Walmart’s grace period is one day
- Average OD cap at depositories is three or four, with Walmart it is five Bank of America does not come close to the number of Walmart locations, and neither does Chase
or Wells Fargo, and these are the big three in branches of all financial institutions
Michael Moebs
- Most depositories are open eight hours a day, compared to Walmart stores, which are typically open 17 hours daily. And most FIs offer very limited Saturday hours and most are closed on Sunday
Can a CU Compete?
Is it possible for a depository to compete with Walmart and win?
“The major advantage Walmart has over banks, credit unions and thrifts—and even other fintechs—is they make a profit with almost all of their checking accounts,” said Moebs. “Ninety-four percent of all depositories lose money with checking accounts. If you want to be in the consumer checking account business you must make your consumer checking accounts profitable. This is the vital, competitive function for the future of checking.”
Moebs offered a history lesson for context, noting that 50 years ago banks started to unbundle their services.
“This was quickly followed into consumer checking for all depositories,” said Moebs. “If depositories want to compete with Walmart they must bundle or do what now is called relationship banking. This means offer auto, mortgage and business loans at reduced rates if your checking account is with us. So, can banks—especially community banks—credit unions, thrifts and fintechs get to profitable checking and bundle to compete with Walmart? Time will only tell.”