The world’s largest retailer, Wal-Mart Stores, Inc. (NYSE:WMT), announced today that it will begin offering Wal-Mart-2-Wal-Mart money transfer service to the 34 million households in the United States that were classified as “unbanked” or “underbanked” in a 2011 study by the FDIC. That is to say, households that either don’t have a checking or savings account or have used check cashing and payday loan services.
A much cheaper option
The service will allow customers to send and receive money from over 4,000 stores in the United States for amounts up to $900. Transfers up to $50 will cost $4.50, while transfers of $50 to $900 will cost $9.50. This is a significant savings over both Western Union and MoneyGram who charge $76 and $73 respectively. As a result of the announcement and Wal-Mart entering this market shares in Western Union are presently trading at $15.37, down $0.68 or 4.28%. Moneygram International Inc (NASDAQ:MGI) is reeling in trading today with shares at $15.01 down $2.98 or 16.56%.
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MoneyGram, a partner of Wal-Mart Stores, Inc. (NYSE:WMT), must be thinking today that with friends like this who needs enemies? After essentially decimating the company, Wal-Mart accounted for 27% of its total fee and investment revenue last year, the company added insulted to injury with a statement.
“Moneygram International Inc (NASDAQ:MGI) continues to be a very valuable partner for us and our customers,” Daniel Eckert, senior vice president of services for Wal-Mart U.S., said on a conference call. “We saw an opportunity to provide a simple and straightforward capability.”
Prior to today’s announcement, Wal-Mart Stores, Inc. (NYSE:WMT) was already offering a number of financial services to its customers including check cashing, bill pay, money orders and tax preparation services, as well as prepaid card programs.
In order to offer its customers this new money transfer service, Wal-Mart Stores, Inc. (NYSE:WMT) is teaming up with Euronet Worldwide, Inc. (NASDAQ:EEFT) a subsidiary of Ria Money Transfer rather than pursue a further partnering with MoneyGram.
It appears in recent months that Wal-Mart Stores, Inc. (NYSE:WMT) wants it all and is willing to under-price its competitors – and partners – in order to gain immediate entry into new areas of businesses. Just ask GameStop Corp. (NYSE:GME), whose stock was battered by the announcement of Wal-Mart’s entrance into the used video game market.