Wal-Mart Stores (WMT) has found a new way to get more customers into its stores: getting their own hard-earned cash more quickly.
Starting on Tuesday, the retailer is allowing customers to cash out their tax refunds and receive up to $7,500 in cash at about 3,000 stores under a service it is calling “Direct2Cash,” its latest move to broaden the financial services it offers to its low-income customers and increase the number of visits customers pay to its stores. Customers could already use the tax preparation services in Wal-Mart stores and get their refund via direct deposit or check.
Last April, it launched a money transfer service that has challenged the dominance of Western Union Co. (WU) and MoneyGram (MGI), and aimed squarely at its low-income customers, many of whom live paycheck to paycheck. Two weeks later, it started an insurance price comparison service.
The cash tax refund service, for which Wal-Mart is not charging a fee, is another way for the retailer to win business from its many customers with little access to banking services, and get them into stores that are experiencing soft traffic: according to a 2011 survey by the Federal Deposit Insurance Corp, 8.2% of U.S. households are “unbanked” and another 20.1% are “underbanked.”
What’s more, customers with wads of cash in their pockets while in a Wal-Mart store are more likely to spend it there. Daniel Eckert, senior vice president of services for Wal-Mart U.S., told reporters on a conference call that it would help the retailer to have customers with some extra “jingle in their pockets.” In its third fiscal quarter, Wal-Mart eked out a small rise in comparable sales but traffic fell 0.7%, a trend the discount chain wants to reverse.
For the tax refund service, Wal-Mart is working with Tax Products Group (TPG), a Green Dot Company (GDOT), and Republic Bank & Trust Company, which provide tax-related financial products and services and offer Direct2Cash as an option to customers. Some 25,000 tax preparation locations using software with the Walmart Direct2Cash option will provide this service for no more than $7 at the time of filing. The company said customers would save money by not having to pay fees on check-cashing services or a processing fee.
Wal-Mart has eyed a bigger piece of the financial services market for years. In 2007, the company withdrew an application for a bank charter because of opposition from banks and labor unions.
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