Walmart is able to use its enormous size and market power to mercilessly squeeze its suppliers and bring its prices down to extraordinarily low levels. Liberal elitists like the ones who read this magazine tend to believe that although those low prices provide a boon to the store's largely low-income customer base, that is outweighed by the negative effects Walmart has on wages and benefits, when it comes not only to its own employees but also those through its supply chain and the larger labor market. And that's not to mention its dependence on government—the company not only makes billions of dollars every year in sales from food stamps, because of its meager wages and benefits, taxpayers subsidize tens of thousands of Walmart employees with those very food stamps, and Medicaid insurance as well.
OK, so you know all that. But what if Walmart uses its huge footprint to create a separate benefit for low-income people in an area where they could really use it, and without hurting (almost) anybody else anything in the process? Maybe they can.
Yesterday, we learned that Walmart is getting into the money transfer business, undercutting the couple of companies that dominate the market, one of which (MoneyGram) already has a partnership with Walmart:
When the Walmart-2-Walmart money-transfer service launches at 4,000 U.S. locations on Thursday, it will cost $2 less than the $11.50 MoneyGram charges to move $50 to $200 between any two stores. The retailer is working with Ria, a provider of money transfers. Amounts under $200 currently account for more than 75 percent of remittances sent between Walmart stores through MoneyGram.
An even bigger discount comes with higher-value transfers. To move $900, MoneyGram charges a $76 fee, according to figures cited by Walmart. The new Walmart price? Just $9.50.
This is the kind of thing Walmart can do to begin to tip its karmic scales back a bit: take a business where poor people are being exploited with appalling fees, and use their size to offer the service at a more reasonable rate. The reason I'd give them only one or two cheers instead of three is that the fee still seems pretty high. Unless there's something I don't understand about the money transfer business, it would seem this is a task that requires extremely low overhead. All you need is a clerk and a computer on each end. It doesn't cost the vendor any more to transfer $1,000 than it does to transfer $100, which is why increasing the fees for higher amounts is pretty exploitative—especially when you're talking about a $76 fee for a $1,000 transfer. But even if Walmart is charging the same $9.50 for all transfers, that's still a pretty high fee. The actual cost to the company of executing the transfer is probably just pennies. Even when you add in the clerks, a kiosk for them to sit at, a computer and a cash register, I wouldn't be surprised if they could charge $5 a transfer and still make a profit.
Which gives me the opportunity to plug one of the best ideas to come along in the last few years: postal banking. I wrote about it as length here, but the short version is that the Postal Service, which is struggling to find new sources of revenue as mail volume declines, can and should start offering financial services to people who don't have access to them through banks. That could include money orders (which they already do), pre-paid debit cards, small loans, online bill-paying, check-cashing, and—why not—money transfers. There are over 30,000 post offices in America (compared to 4,200 Walmarts), so pretty much wherever you are, there's one nearby. All they need is Congress's permission.
If Walmart comes in and undercuts MoneyGram and Western Union with their size, that's fine—few people will weep for them and it's the market in action. And if the Postal Service then turns around and does the same to Walmart? The same principle applies.