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« Another template from Japan? | Main | When Monopoly money was real »

Quasi-bank account?

By davebirch posted Jun 7 2007 at 10:09 AM
[Dave Birch] Yet more new payment mechanisms. In the U.K., the Post Office has already launched an electronic money transfer service which enables recipients to receive funds via a barcode sent to a mobile phone or e-mail address. The "Payout Service" allows companies to distribute cash payments at a fraction of the cost of issuing cheques, the Post Office says. Bascially, companies send a barcode by text, e-mail or post to the recipient. This barcode can be scanned at any Post Office branch counter, and the recipient receives an instant cash payment. It might be worth printing out a few random barcodes and going down to the Post Office to see if any of them are worth anything -- sort of like a lottery, but more fun and available at 14,000 Post Office branches in the U.K. There must be more to it, because British Gas and Unilever liked the pilot and plan to extend their use of it. Unilever used it for fulfillment of a promotion for one of its products to 22,000 customers. Joanna Weston, a Unilever direct communication executive, says:
We didn't have a clear fulfillment process in place to make a large quantity of small payments to our customers... This could have been problematic for us, as raising a cheque is 600 percent more expensive than using the Post Office Payout service.
For people like me who can't even be bothered to go down to the Post Office office, there's Obopay's AOL instant messenger plugin, enabling you to make payments directly from your AIM Buddy List. The Obopay AIM plugin is accessible via your desktop or your mobile phone, so no matter where you are, you can access your Obopay account using AIM. Since Obopay comes with a pre-paid MasterCard, this means that one of your buddies can send you cash via AIM and then you can go spend it using the card. I'll see if I can find out what the charges are so we can compare it with Post Office barcodes.

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I have a suspicion, though, that neither of these schemes will generate the volume that Wal-Mart's new Wal-Money Card will. According to today's Financial Times, Wal-Mart are going to launch a pre-paid card (it will actually be a pre-paid Visa product from GE Money) targeting the 60 or so million unbanked in America: they want these people to use the card as a "quasi-bank account" and (assuming that you can get one just by wandering in to Wal-Mart and picking it up -- no "Real ID" or any such silliness) then not only will they do so, they'll do so enthusiastically because they go to Wal-Mart all the time already. Given the we were discussing only recently the possibility of a pre-paid cards as a solution to the problem of the high cost of payments for the unbanked (ie, the apparent law of payments that says the poorest people must pay the highest transaction costs) I think Wal-Mart are on to a winning proposition and it can only be a matter of time before (eg) Tesco do the same in the U.K.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


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So you don't need a real bank account now, at least for simple transactions.

So its to do with capital adequacy? Or just lending? I know that in the US PayPal was deemed not a bank. If they started to lend, then I guess they would be, but to my way of thinking if they allow you to keep a balance of some sort, it starts to make them look like a bank...


"So what is a bank?"

The definition of bank is to do with credit, in essence, not payments.

Wal-Mart fees are lower than other U.S. prepaid cards targeting the unbanked, but not great. The monthly maintenance fee is waived for balances of $1,000 or more.


Standard Fees

One-time Temporary Card Issuance Fee at Wal-Mart store $8.94

Reload Personalized Card at Wal-Mart (No Check Cashing) $4.64

Reload Personalized Card at Wal-Mart (Check Cashing) $0.00

Reload Personalized Card at Green Dot Location (other than Wal-Mart store) Varies by Retailer

Additional Personalized Card Fee $8.94

ATM Cash Transaction – Domestic $1.95

ATM Cash Transaction - International $3.50

ATM Balance Inquiry $0.75

Monthly Maintenance Fee $4.94

Operator Assisted Call $2.00

Teller Cash Transaction/td> $3.50

Stop Payment Order Fee (see section 7) $5.00

So what is a bank? Once you've got a secure way to facilitate payments, what more is there before you effectively become a bank? Does anyone know the reasoning behind PayPal becoming a bank in Europe?

"80 million unbanked is the fabrication of over-zealous marketing types"

I did seem a little high to me. As it happens, I'm in the U.S. at the moment and I was told this morning that the correct figure for the target market should be 25 million because it isn't just adults. I look forward to hearing some more opinions on this.

As for the fees, I couldn't agree with you more, but this might be where Wal-Mart is going to make the breakthrough.

Wal-Mart Money Card is actually issued by Green Dot Corporation out of Southern California. Check out the web site at:

www.walmartmoneycard.com and you'll see Green dot is doing all the work. Kudos to that scrappy little upstart for beating GE and walmart at their own game. They'll get rich off this one.

The idiot at FT.com who said there are 80 million unbanked in the US must be including third graders and toddlers in their calculations! The media should challenge these numbers instead of regurgitating press releases from banks as if it were gospel.

80 million unbanked is the fabrication of over-zealous marketing types and entrepreneurs trying to exaggerate their business models hoping to dupe investors into giving them money for dumb ideas.

The facts are easy to get: The US Census bureau says there are 113 million households in the U.S. - of which 1/3 are single person households. The Federal Reserve says less than 8% of households are unbanked - meaning no checking or savings accounts. Do the math - way less than 15 million ADULTS are unbanked - and that is usually a temporary situation as most people are unbanked because they're unemployed or just getting started in life (e.g., young adults or new immigrants). The fees for the money cards are too high - most people who get these cards use them a few times then toss them after the fees eat up their savings.

The feds say less than 4 million are chronically unbanked - because of issues including things like drug addictions, imprisonment, or under state-supervised care.

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