In the grand scheme of things, it should come as no surprise that Walmart (WMT) is diving into the money-transfer business.
The world’s largest retailer has been cashing certain types of checks for years, established an ownership relationship with prepaid credit card name Green Dot (GDOT) in 2007, waded deeper into the prepaid card game by partnering with American Express (AXP) to unveil its prepaid credit card venture called BlueBird in 2012, and has since established its so-called in-store Money Centers as an alternative to banks by offering payroll deposit and bill-pay services.
The next natural step in that progression was adding an offer to wire cash from one party to another within its network of Money Centers.
Yet, the news still seemed to catch most investors off guard.
When WMT announced the new service Thursday, shares of both Western Union (WU) and MoneyGram International (MGI) — the latter of which actually already offers cash-wire services inside many Walmart stores — tanked on the news. WU stock fell 5%, while the value of the much more vulnerable MGI stock plunged more than 17%.
Of course, the questions that investors should be asking themselves now are (1) does this really matter, and if so, (2) who really wins and loses?
WMT: A Potent, Though Limited, Competitor
Beginning on April 24, Walmart will transfer cash from one store to another for customers wishing to wire money long distances to another party. Better still, WMT will perform the task at prices considerably lower than prices charged by the likes of Western Union or MoneyGram. In some cases, the savings might be as much as 50%.
A guaranteed game-changer for the money transfer business? It’ll certainly change the landscape, though it might be hyperbole to assume this is an industry Walmart is going to dominate and redefine the way it has value-retailing.
For starters, while Walmarts seem to be everywhere, there are fewer than 5,000 Walmart stores in the United States, and the “Walmart-2-Walmart” service will only be available domestically. Western Union, on the other hand, has more than half a million stations spanning the globe, while MoneyGram mans 35,000 stations in the U.S. and a few thousand more overseas. Although Walmarts are common, they’re not everywhere, and they might not always be as accessible as the alternative wire transfer service providers.
Walmart’s service also will cap an individual’s transfers to $900 per day … much lower than the limits imposed by MoneyGram and Western Union.
Still, if cost is a factor, it’s going to be difficult to compete with Walmart’s new venture.
Winners & Losers
As for why WMT is bothering getting into the money wiring business into the first place…