I don’t know where I was that I missed the announcement that Wal-Mart would enter the investment services market. Wal-Mart has long had an interest in entering the financial services market. Despite all the recent bad news about how Wall Street has hosed the country, financial services are still a very profitable sector. Wal-Mart has had some road blocks in becoming a bank. Despite this, they have made some inroads into financial services.
Wal-Mart has teamed up with Sharebuilder to offer DRIP-style investing to consumers. Although Sharebuilder also offers mutual funds and non-dividend paying stocks, they provide their investors with fractional shares, which major brokerages do not, except for retirement accounts. With Sharebuilder, if you have $25 to invest, they’ll take that and buy you $25 dollars worth of stock, mutual fund, or ETF, plus their fee. It does not matter if it is only a half of a stock, a quarter, or even a tenth. Sharebuilder democratizes Wall Street so that everybody can participate in the market. Sharebuilder is a pay-as-you-go brokerage service without a minimum balance. The way that Wal-Mart tied the investment service to another service is pure genius.
The first move into financial services came when Wal-Mart teamed up with Green Dot Corporation to offer pre-paid debit card services. Green Dot is a “provider of retail based financial services for America’s underserved community”. There is a large population of people who are “unbankable”. The underserved Americans generally have a bounced check or bad credit; which makes them unappealing to banks when they apply for a checking or savings account. However, Wal-Mart has a much broader customer base than the “unbankable”.
In recent months, I made the switch to the Wal-Mart Money Card. I realized one day that Wal-Mart has made their money by serving underserved areas, mostly rural. Therefore, by using Wal-Mart as my bank, I could be assured that there is a branch almost anywhere in the country I go. In my neck of the woods, there are at least 6 Wal-Marts within 20 miles. Which bank do you know that goes to small towns all over the nation? Sure, they charge a fee for putting money on your money card; but you can’t overdraft on a pre-paid card. Therefore, there are no NSF fees. So long as you deposit a minimum of $1,000/month, your service is free. It just made sense to shop and bank at the same place.
The other day while depositing money in my Wal-Mart Money Card, I noticed a small line that mentioned investments. I would not have known about this otherwise. It was through curiosity that I learned how all of this ties together. After investigating the investing discovery, I signed up. After all, I’m a Wal-Mart customer. The genius part on behalf of Wal-Mart is that they allow you to use your Wal-Mart Money Card to fund your Sharebuilder account. This really opens up Wall Street to everybody.
I know that there are a bunch of Wal-Mart bashers out there. You have to give Wal-Mart credit. They have low prices. They offer “banking” to everybody. They offer investing to everybody. They bring services to people who traditional banks and brokerages would not even touch. Wal-Mart does more for the poor than government and Wall Street could ever do. AND they make money. I can only speculate that Wal-Mart may soon start offering mortgages. Watch out Wall Street; Wal-Mart is going to teach you how to do things right.
