Wal-Mart Stores Inc. is pushing deeper into the financial services arena, rolling out a cheap new way for customers to transfer money.
Called Walmart-2-Walmart, the service allows people to transfer up to $900 a day to and from any U.S. Wal-Mart store via Wal-Mart's new partnership with Ria Money Transfer. It launches in stores this coming Thursday.
Customers will pay $4.50 to transfer up to $50, and pay $9.50 for all transfer sums above that. That's significantly less than what MoneyGram and Western Union charge for amounts above $50, according to Wal-Mart's figures.
The nation's largest retailer said that it's responding to customer complaints about high and confusing fees. Wal-Mart already offers money transfer services through longtime partner MoneyGram International Inc. as well as Xoom Corp., so Wal-Mart appears to be undercutting its own existing service. Wal-Mart's news release said it's challenging the status quo to drive down prices.
Shares of MoneyGram and Western Union took a dive on the news, with MoneyGram shares plunging 18 percent.
A Wal-Mart spokeswoman said it will continue offering the other services and called them a "great option" for transferring money to other countries, or to non-Wal-Mart locations.
"We're interested in providing our customers choices," said Molly Blakeman, a spokeswoman for the Bentonville, Ark., retailer.
The size of the domestic money transfer market remains something of a mystery, but experts agree it is a small portion of the tens of billions of dollars people in the U.S. send abroad each year. However, it's a service that is vital for many low-income households, those who don't use banks and military families.
"It's the guys working the oil fields in North Dakota and sending their paychecks down," said Michael Brown, chief executive of Ria parent Euronet Worldwide Inc. in Leawood, Kan.
Brown said Wal-Mart's approach to domestic money transfers will "upset the apple cart."
"It's been a duopoly up to this point," said Brown, referring to the industry's dominant players, Western Union and MoneyGram.
MoneyGram, which moved its headquarters from St. Louis Park to Dallas in 2009, has been Wal-Mart's exclusive money transmission partner for Wal-Mart stores in the U.S. and Puerto Rico for more than a decade. It was caught off guard by Wal-Mart's announcement.
MoneyGram CEO Pam Patsley said she learned about the new service Wednesday evening. Her company has a three-year contract with Wal-Mart that started one year ago and has provisions for extensions, she said in an interview.
"There is nothing about our core assets that are diminished by Wal-Mart's announcement this morning," Patsley said. "Certainly we have known, and been very clear to share with everyone, that Wal-Mart has had the ability to launch a white label service since July of last year."
She said MoneyGram does not plan to match Wal-Mart's new low price on domestic transfers at this point.
"We hope to earn their business each and every day," she said.