Walmart’s numerous quests in banking has suggested that distribution of financial products may not be exclusive to financial institutions. The mega retailer’s partnership with Green Dot Bank in offering low-cost checking accounts to store customers is expected to complement its wide array of discounts, deals and loyalty initiatives as well as help provide even greater control over the spending assets of its low-income consumer base.
For decades, Walmart’s target market has been low-income households that often live paycheck-to-paycheck. Walmart’s discount-oriented business model is ideal for these customer segments, many of which are underbanked or even unbanked. To no surprise, Walmart is happy to offer checking accounts to its customers, ensuring that disposal income is spent largely at their stores.
As most financial institutions would tell you, part of the responsibility to offering consumer checking accounts is ensuring that consumers remain financially responsible. To address this, Walmart should deliver a personal financial management (PFM) experience that is seamlessly integrated in both their checking accounts and loyalty programs.
Realistically speaking, customers of traditional banks have been lukewarm on PFM for quite some time, with a handful of tech-savvy consumers resorting to third-party products like Mint for budgeting and financial planning. However, these customers are in far less need of PFM tools when compared to Walmart’s customers, who require help budgeting, planning and saving for high-value purchases.
Offering PFM is in the best interest of Walmart, who loses out on sales when forced to decline a NSF transaction made with one its checking accounts, rather than applying an overdraft fee. Financially responsible customers tend to generate consistent, cross-product spending at retail outlets, which potentially increases loyalty toward both the store’s products and financial services.
One challenge for Walmart is delivering a digital PFM experience to a consumer base that tends to lack the latest mobile technology. Additionally, these this consumer segment is often financially illiterate and not well accustomed to financial goal setting, spend dashboards and the like.
A solution that is simple yet engaging when it needs to be is precisely what Walmart should be eyeing with regards to PFM. Walmart might employ real-time text messaging based on recent spending and low balances for consumers that own feature phones instead of smartphones as well as provide detailed a web portal for those with only access to a desktop computer. Walmart might even go as far as adding in-store kiosks for checking balances and paying bills or adding a snapshot of one’s finances on the point-of-sale terminals at checkout or on their paper receipts.
PFM is surely the next logical step for Walmart, which has been active in the financial space for years. Should Walmart venture into the PFM space, it must remember that financial management has never been a one-size-fits-all solution. Especially with regards to low-income, financially illiterate consumers, PFM products must be both tailored to individuals and engaging.