The banking sector is slow and ungainly, bloated with taxpayer money, and fettered with poorly thought out regulations. Other firms have been sniffing around the banks' turf for awhile now, and Walmart has just made a big move, offering pre-paid American Express cards that will act as debit or credit cards, let users withdraw cash from ATMs, and eventually allow them to write checks. The cards require no minimum balance, and there's no such thing as an overdraft fee.
According to a recent government survey, nearly 1 million households exited the banking system from 2009 to 2011. One in four American households, or 28.3 percent, had one bank account or no bank accounts as of last year. A third of these households told researchers that they did not have enough money to open and fund an account.
Banks will still have a role to play in our Walmartified financial future, but they may be pushed out of the retail business:
“What’s interesting about this product is that anybody can manage their money on a day-to-day basis without ever really having to step foot in a bank branch,” said Jennifer Teshcer, president and chief executive at the Center for Financial Services Innovation, a think tank. “Banks will continue to play an important role in safeguarding our funds,” she added, “but whether they will continue to be the front door for the mass market is what’s at stake.”
Naturally, the U.S. Consumer Financial Protection Bureau is gearing up to regulate the pre-paid cards.