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Wal-Mart cashes cheques

WHAT is retail behemoth Wal-Mart up to these days?

Wal-Mart already has “MoneyCenters” in 1,000 of its U.S. stores, and the company said yesterday it plans to to add 400 more by the end of the year. The centers offer services like check cashing and bill pay that are often considered part of the broader “fringe banking” system. [. ] Lots of those people go to local check-cashing outfits that often charge high fees. So Wal-Mart, which charges $3 to $6 cash a check, can be a good alternative, said Alejandra Lopez-Fernandini, who works for a New America Foundation program that aims to help low- and middle-income people build wealth.

Matt Yglesias notes :

If you're cashing, for example, a $1,000 biweekly paycheck then $6 is almost one third the price MoneyGram is asking. Nothing too earth-shattering about this, but it underscores the point that a lot of the time the best solution to abusive business practices is to find ways to get competing firms into the business.

Cheque-cashing and payday lending businesses are very common in poor neighbourhoods around the country. They provide the most basic financial services to unbanked customers, at

what are typically described as usurious rates of interest—often 400% APR or more. And indeed, the entry of Wal-Mart, which also serves poorer communities, is sure to place significant downward pressure on the rates charged by other lenders. As Mr Yglesias notes, this is Wal-Mart's general MO, though when the victims are local hardware stores or "mom and pop" grocers (or, indeed, labour forces), its actions tend to receive somewhat less applause.

This just continues to illustrate how interesting Wal-Mart is as a phenomenon and a mirror of American society and culture. Wal-Mart clearly has market power, which it occasionally uses abusively, if not necessarily illegally. But sometimes, it uses its market power to accomplish things government entities are unwilling or unable to accomplish—pressing environmental standards on its suppliers, for instance, or reining in abusive lenders. I just appreciate Wal-Mart's ability to demonstrate the strangely ad hoc way in which American institutions manage to muddle through. Americans should maybe be taking Wal-Mart's market power a little more seriously, but hey, so long as its ability to shift the economics in local markets accomplishes goals a dysfunctional federal government is unable to address, well, it may be better to leave well enough alone.

Source: www.economist.com

Category: Payday loans

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