Walmart will be stepping into MoneyGram and Western Union’s territory when it introduces and goes live with its own domestic money transfer services called “Walmart-2-Walmart” next Thursday on Apr. 24. The retailer giant, which has approximately 4,000 locations in the US, will offer money transfer services of up to $900 between its locations domestically. This means that anyone looking to transfer funds over $1,000 or more will still need to turn to MoneyGram or Western Union.
As is the practice with Walmart, the company is offering markedly cheaper transaction fee rates as compared to rival services. The retailer firm has teamed up with Euronet Worldwide’s Ria Money Transfer for their new business venture and promises to offer customers the option to wire funds “for up to 50 percent less than similar offerings on the market.”
Transaction fees for transfers under $50 will be $4.50, whereas larger transactions will bill on a blanket fee basis of $9.50. Therefore, even though the money transfer services that Walmart has introduced is limited to US locations and caps at $900. A lot of people in the US that use money wiring services on a regular basis are likely to opt for the retailer’s services as it will be much cheaper than MoneyGram or Western Union, which can charge as much as $70 or more for a $900 transfer.
The giant said that Walmart-2-Walmart is targeting people who prefer to use alternate methods of paying bills and transferring money other than banks. The firm further said that low-income people will also benefit from their competitive rates as their transfer fees are up to 50 percent lower than those of competitors.
WalMart’s senior vice president of services, Daniel Eckert, told AP that they had decided to enter into the wiring service business when they heard their customer’s complain of the high transaction fees that money transfer firms charge. While offering their customers more feasible financial options, Walmart was also hoping to bring in more customers to their stores, he added.
Meanwhile, on a related note, Walmart has no intention of ending its partnership with MoneyGram, branches of which are located inside many Walmart stores throughout the US. Interestingly, MoneyGram was not informed about Walmart’s plan to team up with Ria Money Transfer. Eckert said that Walmart and MoneyGram have a strong partnership and their contract was renewed in 2012. He further pointed out that Walmart is not likely to take away customers from MoneyGram since the later has no limits to transferring money and deals with international transactions, which the former does not offer.
However even this slight comforting news did not stop MoneyGram shares from falling nearly 18 percent after the announcement. Other rival firm, Western Union shares also fell more than five percent since the announcement. As expected, shares of Walmart rose following the news.
Nevertheless, MoneyGram said that they would not be “taking any pricing actions” following Walmart’s introduction into the wire service industry. The company said that even though Walmart is its largest corporate customer, the revenue it was providing to the firm has been decreasing in the last five years.
On the other hand, Western Union also said that it is not worried. The firm said they offer many diverse services for quick money transfers such as in minutes, the next day, online or even directly into a bank account, some of which Walmart is not offering. Western Union also pointed out that they are firmly established in the US domestic money transfer space since they charge $5 for transactions of up to $50 since 2009 and therefore, Walmart is not making a big dent in their customers of up to that range.
Meanwhile, the decision of Walmart to introduce money transfer services is expected to be very welcomed by the consumers, not only because they would have a cheaper alternate to existing wire services, but also because many do not have bank accounts and completely depend on these wire service companies for their financial needs. According to a Federal Deposit Insurance Corp. of 2011, 10 percent of American households do not have a checking account, whereas, 29 percent do not have a savings account. The entrance of Walmart into the money transfer industry would benefit the people who use wire services regularly to transfer funds and pay bills.
By Faryal Najeeb