Twenty-three Kmart stores in Illinois and three other markets are testing financial centers where shoppers can cash checks, pay bills, place money orders and transfer money.
“We’re looking at how to better utilize the real estate in our stores and to better serve our customers,” Kmart spokeswoman Shannelle Armstrong said.
Kmart’s pilot financial centers are staffed by company employees, she said. But Armstrong declined to comment on whether a bigger rollout is planned, or what the retailer has learned so far from its test.
Seven of the Kmart stores are in Illinois, 10 are in Los Angeles, five are in Puerto Rico and one is in Wisconsin.
Kmart, which is owned by Hoffman Estates-bases Sears Holdings Corp., will join other big retailers that provide financial services to the nation’s underbanked and unbanked. Retail giant Walmart, for example, has money centers in many of its stores, offering money transfer, bill pay and check cashing, among other things.
In September, Walmart chief executive Bill Simon said the world’s biggest retailer continues to add money centers to many of its stores.
It has “been a rapid growth area for us,” Simon said. A September 2010 article in trade publication U.S. Banker said Walmart has money centers in about 40 percent of its U.S. stores. Walmart’s efforts to get a limited bank charter, however, have been stymied.
Walmart, which estimates that a quarter of the population is either underbanked or unbanked, charges $3 to cash a check up to $1,000, and a $6 fee for checks up to $5,000; historically, many rival services charge from $6 to $15. Walmart bill payment fees range from 88 cents for standard three-day delivery, to $3.95 for express payments, where verification arrives in 10 minutes .
Some estimates indicate that up to 10 percent of American families are unbanked and that a substantial share of the population may be underbanked, according to a Federal Deposit Insurance Corp. study released last year. The Federal Reserve has reported that 9 percent to 13 percent of U.S. households lack “transaction accounts,” and Chicago-based Center for Financial Services Innovation has estimated that 40 million U.S. households are underbanked, the FDIC recounted in its report.
And those numbers could be growing as some traditional bankers have warned recently that, as they face more restrictions on the levels and types of fees they can charge depositors, they might have to discontinue services such as overdraft coverage, driving more consumers to alternate providers of financial services.
Smart idea, especially with regular banks raising fees that will mostly impact lower income customers. Maybe they can do some payday lending too.
About 5 years too late at least. If Sears/Kmart keeps chasing what other retailers have already done instead of innovating new ground, they’ll continue to bury themselves.