Wal-Mart Stores Inc.’s plan to start a money transfer business sent shares of Western Union Co. and other services lower on the threat of competition from the world’s largest retailer.
Walmart-2-Walmart Money Transfer Service will let customers transfer money to and from more than 4,000 stores in the US, the Bentonville, Arkansas-based retailer said on Friday in a statement. The announcement pushed shares of Western Union lower by as much as 9% while MoneyGram International Inc. sank 21%.
During the past decade, Wal-Mart has expanded its offering of financial services to customers yet has been unable to get a bank charter amid resistance from US lenders and labour organizations. In 2005, banks and unions opposed the retailer’s application to open a Utah-based industrial bank. Wal-Mart eventually dropped the application.
Since then, Wal-Mart has opened financial-service centres where customers can cash checks, pay bills and transfer money. The retailer also has offered prepaid debit cards, including Bluebird, a partnership with American Express Co., and Green Dot Corp., which can be used on the Visa Inc. and MasterCard Inc. networks.
The new service, available from 24 April, will let customers transfer money for as much as 50% less than similar offerings elsewhere, Wal-Mart said. For example, transferring $400 to $500 will cost $9.50 at Wal-Mart compared with $34.50 to $40 at a competitor, according to the statement.
Western Union offers domestic money transfers at a fee of $5 for a $50 transfer, Dan Diaz, a spokesman for the Englewood, Colorado-based company, said in an e-mail. Money transfers within the US accounted for about 8% of revenue in 2013, Diaz said.
MoneyGram said it isn’t taking any pricing actions at Wal- Mart or any other location in response to Friday’s announcement and that it will continue to monitor the market.
While Walmart is our single largest agent, and experiences healthy growth, it has been decreasing as a percentage of our revenue for the past five years, the company said in an e-mailed statement.
Wal-Mart rose 0.6% to $77.66 at the close in New York. The stock has dropped 1.3% this year compared with a 0.9% gain for the Standard & Poor’s 500 Index.
Western Union declined 5% to $15.25. MoneyGram, which currently provides money transfers at Wal-Mart stores, fell 18% to $14.81, the biggest one-day drop since October 2008. MoneyGram transfers still will be available at Wal-Mart.