Kmart offers financial services in pilot program
Twenty-three Kmart stores in the Los Angeles area and three other markets are testing financial centers where consumers can cash checks and pay bills. Kmart joins Wal-Mart in offering basic services to consumers who have little if any access to traditional banks.
“We’re looking at how to better utilize the real estate in our stores and to better serve our customers,” said Shannelle Armstrong, spokeswoman for Hoffman Estates, Ill.-based Sears Holdings Corp., which owns Kmart. Ten of the Kmart stores are in the Los Angeles area, seven in Illinois, five in Puerto Rico and one in Wisconsin.
Wal-Mart for years has housed similar money centers in hundreds of its stores.
Kmart’s pilot financial centers are staffed by company employees, said Armstrong, who declined to provide other details.
Some estimates indicate that up to 10% of U.S. families don’t have a checking or savings account. A 2009 Federal Deposit Insurance Corp. study said a substantial share of the U.S. population may be “underbanked,” meaning that even though they might have a checking or savings account, they have used nonbank check-cashing services, payday loans, rent-to-own agreements or pawn shops at least once or twice a year.
Tom Feltner, vice president for Woodstock Institute, a Chicago-based nonprofit research group focused on fair-lending issues, said he wasn’t surprised by Kmart’s move but said consumers shouldn’t become dependent on retailers for financial services over the long term.
“Those services ideally should be provided in the context of a broader, lifelong relationship,” Feltner said. “It is not enough to merely cash checks or conduct transactions; a banking relationship needs to include creating a good credit record, saving, borrowing responsibly and building assets.”
Wal-Mart has money centers in about 40% of its nearly 3,000 Supercenters, according to a September article in trade magazine U.S. Banker. “We’re adding money centers to many of our stores,” Bill Simon, chief executive of Wal-Mart Stores Inc.’s U.S. operations, said. “That piece of business has been a rapid growth area for us.”
Wal-Mart charges $3 to cash a check up to $1,000. Many check-cashing services charge $6 to $15. Bill payment fees are 88 cents for standard three-day delivery, and start at $3.95 for express payments, where notification occurs in 10 minutes.
The Kmart initiative, which also includes money transfers and money orders, is headed by Susan Ehrlich, president of Sears Financial Services. On Monday she was named to the Federal Reserve Board’s consumer advisory council, which advises the board on its duties under the Consumer Credit Protection Act and on other matters related to consumer financial services.
