Wal-Mart Goes Big In Fringe Banking : Planet Money When services are offered in 40% of the Wal-Marts in America, does it really make sense to call them fringe?

Wal-Mart Goes Big In Fringe Banking

(Robyn Beck/AFP/Getty Images)

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.

But when services are offered in 40% of the Wal-Marts in America, does it really make sense to call them fringe?

Seventeen million U.S. adults live in a household where nobody has a bank account, according to a recent FDIC report.

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.

At the same time, she said, using Wal-Mart to cash checks is "a band-aid" -- what people really need to do to start moving up the economic ladder is establish a relationship with a bank or credit union.

Which brings up an interesting backstory. A few years ago, Wal-Mart applied to get a bank charter, but got turned down, the WSJ notes. A charter would have allowed the company to take deposits and make loans.

The company tells the WSJ it's content to stay in the narrower sector of financial services where it's now working. Besides bill pay and check cashing, Wal-Mart sells a pre-paid Visa debit card and offers a few other services.

That puts Wal-Mart at the center of a potentially big flow of money that's largely outside of the traditional banking sector, Rajesh Narayanan, an LSU finance professor who has followed the company, told me. People get paid at work, bring their check to Wal-Mart, put the money on their pre-paid debit card and spend it.

"These things are not big enough to really matter for monetary policy yet," Narayanan told me. But that could change as Wal-Mart opens more MoneyCenters and continues to expand its business. "Remember," Narayan said, "Wal-Mart is 3% of GDP."