It is expensive to be poor. Case in point, if you don’t have access to a bank account and need to send money to a friend or family in a different location, often your only choice is an expensive cash wiring service. Last year the World Bank found that the average cost of remittance services worldwide was 9 percent.
Well, these rates could be changing quicker than anticipated. On the heels of rumors that Facebook is preparing to offer money transfer services, it was officially announced that Walmart will be offering cash transfers for customers between stores, and doing so at their famous Walmart prices.
Say what you will about Walmart, it is hard to dispute that they know how to lower prices. At least initially, they will provide cash transfer services at significantly cheaper rates than most money transfer service providers. For instance, to send $900 between Walmart stores would only cost customers $9.50, a Walmart press release indicates. Transferring the same amount via Western Union would cost at least $52, according to their online price estimator, calibrated for my sending city of Boston.
Along with its low prices, Walmart thrives on its ability to attract customers with the ease and convenience of a one-stop shop. In 2012, it began offering its Bluebird reloadable prepaid cards, marketed as an alternative to checking and debit accounts.
This remittances news about Walmart raises interesting questions about what the future of the market might look like, as more non-traditional players including internet-based groups like Facebook and mobile service providers start offering money transfer.
Unlike with Walmart, the use of mobile service providers or internet-based applications to send money requires that users have a phone or internet access and the know-how and comfort to use these tools to transfer money. Mobile connectivity is widespread, and internet penetration is increasing rapidly, however, much room for improvement remains in mobile money uptake and in internet access. Also, neither of these remittance options provide the ease of cash entry and exit points, and the reality is that most of the world’s poor still operate in an informal, cash society. Walmart on the other hand has 10,957 retail units worldwide.
Though there is one huge shortcoming in Walmart’s new offering: for now, the transfer services are only available between stores in the United States.
Who will be next to join the list of remittances providers? McDonalds is in more than 100 countries, with more than 35,000 restaurants serving nearly 70 million people every day, many of whom might be ideal candidates for a cheap cash transfer service. Perhaps the day is nearing when you will send money to your grandmother in Bolivia or Tanzania while ordering up a Big Mac.
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