Instead of looking to traditional institutions or check-cashing stores, millions of low-income Americans are instead turning to their local big-box retailer for their banking needs, according to a report in The Washington Post.
The newspaper reports that Kmart, Best Buy and Wal-Mart are all testing and rolling out in-store banking services ranging from check cashing and money transfers to bill-payment services.
The attraction for these retailers is the $320 billion industry of alternative financial services that the newspaper report says has long operated in the shadow of the formal banking system and under the radar of federal regulators.
Demand for alternative services is expected to grow as strict new rules force banks to charge higher fees for checking accounts, placing them out of reach of many financially strapped households, the Post notes.
The article cites a recent government survey that shows nearly 30 million households either do not have a bank account or scarcely use one. Some 70 percent of families who are considered “unbanked” earn less than $30,000 a year and many say they will never do business at a bank, the paper said.
These households have usually used a hodgepodge of services to manage their money, and retailers have started to realize that those same consumers are shopping in their stores, the Post said (Wal-Mart, for example, has said that one in five of its customers doesn’t have a checking account).