Consumers Bank on Retailers’ Services
While retailers have chosen not to pursue banking following
the opposition that eventually resulted in Walmart and Home Depot pulling out
of bids to open industrial banks in recent years, many are finding that other
financial services are a means for them to connect with the so-called "unbanked" in
America.
Today, as a Washington Post article points out, there are millions
of low-income people in the U.S. who do not have bank accounts. Stores from
Best Buy to Walmart, however, are offering them services including check-cashing,
money transfers, prepaid cards and kiosks to pay a variety of everyday bills
such as utilities and phone.
Beyond serving the unbanked, a variety of retailers offer other financial
services, such as ways to save on car purchases, financing home improvements
and getting insurance. Sam’s Club is working with its small business members
to help them get loans up to $25,000 through the Small Business Administration.
Kmart, which
has tested check cashing and money transfers in California, Illinois and Puerto
Rico, is rolling out the program nationally.
Susan Ehrlich, president of financial
services for Kmart and Sears, said financial services and layaway programs
are helping to draw the chains "up the value
chain" of consumers looking for help to better manage their money.
"My belief and expectation is that retail is going to continue to play
an increasing and evolving role in the provision of financial services, particularly
in underserved communities," Ms. Ehrlich, who was named to the Federal
Reserve’s Consumer Advisory Council, told the Post. "Our having
a voice in making sure that there is an awareness of that, and that we set
the regulatory framework to accommodate that, is going to be important."
Discussion Questions
Discussion Questions: Does offering financial services provide retailers with a competitive advantage? Do you see retailers taking another shot at getting into banking?
Banking service are a great way for retailers to build lasting relationship with their customer base. It creates traffic, makes them a destination points and helps to build loyalty.
One-stop shopping will always be attractive. How many supermarkets still have bank branches in them? A bunch! Even the retailers themselves still offer banking services. However this trend of banking services by retailers is nothing new, of course. The grocer I worked for in the ’70s cashed checks, gave out money orders, etc. Few trends we see today are truly new. Only the technology improves to enable the new reality.
Retailer Credit Cards–like Home Depot’s card, or even a Macy’s card–are certainly a good way to capture a base of users, build loyalty and even cash in on the whole deal.
However, sellers beware. Consumer financials aren’t as stable as they may appear.
Absolutely, retailers should explore offering financial services to customers. As online shopping continues to grow, here’s another reason to go to the store!