538.com on how WMs cluster near the unbanked

ddavidch

Level 42 Member
Thanks for posting this, interesting read and great site for info.
Its been fascinating to see how things have changed post Dodd-Frank/Durbin.
 

sriki

Level 2 Member
Interesting article.

But, looking at the map, walmarts are not more concentrated around the unbanked. It seems they are concentrated around their home base, Arkansas. However, it's interesting to see the number of unbanked increase as one moves from the north to south.
 
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taxicabnumber

Level 2 Member
I'm really not a fan of the article's provocative URL.

I think to really answer that sort of question more local data is needed (think MSA level or maybe state level). Yeah, from the maps it looks like the South tends to be more underbanked and there are also more Wal-Marts, but states are generally big places. The authors may well be right, but the support isn't convincing.

Are there more Wal-Marts in states with more underbanked people (per capita)? Yes.

Does this mean that this is because the Wal-Marts are clustering around the underbanked?
No, not really. They don't say anything about median incomes or percentage underbanked within N-mile radii of Wal-Marts and how this compares to the general population. How does the percentage of underbanked people compare between a Mississippi town within 2 miles of a Wal-Mart and a Mississippi town where the closest Wal-Mart is 10+ miles away? Doesn't do you much good if all the Wal-Marts in Arkansas are near Fayetteville while all of Arkansas's underbanked happen to live near Little Rock. (This probably isn't the case. But just for example's sake...)

IMO, they (someone?) should look at Wal-Mart's entry into various markets over the past several years. When Wal-Mart enters (or reenters) a new market, is it more likely that the market in question already has a higher %age of the underbanked? Does that percentage change significantly over Wal-Mart's first few years in that market? If the underbanked tend to flock near Wal-Marts, then this is damn compelling evidence for WM to get significantly into the banking space.

NB: for those of you so interested, check out this paper on Wal-Mart entry: http://economics.mit.edu/files/7575
 

penncomm

Level 2 Member
Not sure I see the correlation either. They are looking at the percentage of unbanked. I'm almost certain if you looked at actual numbers of unbanked individuals you would find more real numbers in highly concentrated cities (i.e. New York, LA, Chicago), where Walmarts aren't exactly easy to get to. If they were really going after the unbanked, they would be creating a small, neighborhood store and dropping them right into high population areas.
 

DebentureBoy

Level 2 Member
Microscoping in a bit...

Based on my highly non-scientific poor recollection of Walmarts and money stores... Walmarts are clustered in retail areas and, previously as they were growing, on the edges of county seat sized communities. I don't think Sam wanted his stores in the ghetto -- he wanted them in the fringe areas between the ghetto (using this as a synonym for un-banked) and the uppercrust and he wanted them where there wasn't another option for an all-in-one place to get cheap but fairly decent quality stuff -- a cheaper Sears Roebuck (for clothes), a cheaper Ace Hardware (for tools made out of lead).

Kmart ended up being more of the less well maintained, darker parking lot, crappier part of town option in many cities I've visited. Obviously Target (pronounced Tar-ZHEE) went for the higher end nicer part of town (typically).

The unbanked, and how we might help them, is an area of interest for me (while at the same time having an interest in how products meant for the unbanked can help me fill MY pockets).

DB
 

vike

Level 2 Member
Microscoping in a bit...

Based on my highly non-scientific poor recollection of Walmarts and money stores... Walmarts are clustered in retail areas and, previously as they were growing, on the edges of county seat sized communities. I don't think Sam wanted his stores in the ghetto -- he wanted them in the fringe areas between the ghetto (using this as a synonym for un-banked) and the uppercrust and he wanted them where there wasn't another option for an all-in-one place to get cheap but fairly decent quality stuff -- a cheaper Sears Roebuck (for clothes), a cheaper Ace Hardware (for tools made out of lead).

Kmart ended up being more of the less well maintained, darker parking lot, crappier part of town option in many cities I've visited. Obviously Target (pronounced Tar-ZHEE) went for the higher end nicer part of town (typically).

The unbanked, and how we might help them, is an area of interest for me (while at the same time having an interest in how products meant for the unbanked can help me fill MY pockets).

DB
Should we feel at least a little guilty for taking advantage? Aside from that, an interesting read from Nate Silver's group.
 

El Ingeniero

Level 2 Member
I'm really not a fan of the article's provocative URL.

I think to really answer that sort of question more local data is needed (think MSA level or maybe state level). Yeah, from the maps it looks like the South tends to be more underbanked and there are also more Wal-Marts, but states are generally big places. The authors may well be right, but the support isn't convincing.

Are there more Wal-Marts in states with more underbanked people (per capita)? Yes.

Does this mean that this is because the Wal-Marts are clustering around the underbanked?
No, not really. They don't say anything about median incomes or percentage underbanked within N-mile radii of Wal-Marts and how this compares to the general population. How does the percentage of underbanked people compare between a Mississippi town within 2 miles of a Wal-Mart and a Mississippi town where the closest Wal-Mart is 10+ miles away? Doesn't do you much good if all the Wal-Marts in Arkansas are near Fayetteville while all of Arkansas's underbanked happen to live near Little Rock. (This probably isn't the case. But just for example's sake...)

IMO, they (someone?) should look at Wal-Mart's entry into various markets over the past several years. When Wal-Mart enters (or reenters) a new market, is it more likely that the market in question already has a higher %age of the underbanked? Does that percentage change significantly over Wal-Mart's first few years in that market? If the underbanked tend to flock near Wal-Marts, then this is damn compelling evidence for WM to get significantly into the banking space.

NB: for those of you so interested, check out this paper on Wal-Mart entry: http://economics.mit.edu/files/7575
I think there is an argument to be made that the number of unbanked increases when WM moves into a small town. Certainly the number of small businesses going bankrupt increases.
 

BoonDR

Level 2 Member
One anomaly that stood out to me was NH where it has the lowest percentage of unbanked but is in the top %25 of most WM's. I think it is easily explained by the fact that it's WM's are clustered near the borders of MA and ME, both of which have high sales taxes and NH has none.
 

smittytabb

Moderator
Staff member
Not sure I see the correlation either. They are looking at the percentage of unbanked. I'm almost certain if you looked at actual numbers of unbanked individuals you would find more real numbers in highly concentrated cities (i.e. New York, LA, Chicago), where Walmarts aren't exactly easy to get to. If they were really going after the unbanked, they would be creating a small, neighborhood store and dropping them right into high population areas.
They did just that in Washington, D.C. opening a couple of stores, which I think were the first such stores in an urban center. I suspect it is a test market for this kind of location. I have been to one of the stores which is walkable from the Union Station train and metro station and it is always crowded and busy.
 

vike

Level 2 Member
No. We profit at WMs expense, not at the expense of the unbanked/poor.
I do feel bad a bit at the lack of financial knowledge a lot of the unbanked have. I have a friend who volunteers once a week to help people learn to read. Maybe we should volunteer to help others with the fundamentals of finances. Just thinking about how we might be able to give back/forward.
 

StaticCharge

New Member
I think there is an argument to be made that the number of unbanked increases when WM moves into a small town. Certainly the number of small businesses going bankrupt increases.
No. We profit at WMs expense, not at the expense of the unbanked/poor.
Well, both are true, and could very well feed into each other. Without getting into a political discussion about WM's corporate behavior, and speaking only for myself, there is something to be said for pausing to consider the impact of one's personal profit from WM's banking experiments. Yes, you or I or any other individual may gain from our machinations of their products, but could the revenue generated for WM (profit or loss) further support the negative impact they have on other businesses and their employees in the communities in which they operate? /soapbox
 

PNW-MSSER

Level 2 Member
I think WM has neighborhood markets for the posh areas and super centers for the poorer areas to take advantage of people there, in my area there are 3 krogers in 1 mile radius and a safeway, the WM neighborhood market is a little bit out but is very MS friendly. There is a WM in the poorer part of town but they have shut down almost all such activity. I only see the underbanked trying to cash checks at the money center there.
 

El Ingeniero

Level 2 Member
Well, both are true, and could very well feed into each other. Without getting into a political discussion about WM's corporate behavior, and speaking only for myself, there is something to be said for pausing to consider the impact of one's personal profit from WM's banking experiments. Yes, you or I or any other individual may gain from our machinations of their products, but could the revenue generated for WM (profit or loss) further support the negative impact they have on other businesses and their employees in the communities in which they operate? /soapbox
Consider a near minimum wage employee, making $8/hr, spending 5 minutes on a 4x$500 billpay or MO transaction.

WM pays the empty 67 cents for their time, not counting payroll taxes.

Swipe fees are going to be 21 cents/card (the maximum), a total of 84 cents.

Cost of the transaction will be $1.51, not counting amortization of equipment, cost of keeping the lights on, etc.

They are losing money on us, for sure. Only thing is, they have to have a service center, and the profits from the rest of the machine so far overwhelms the losses we create, that it's literally a waste of management time in most situations.

Conclusion: Smile, smile, smile and be a villain. :)
 

vike

Level 2 Member
The biggest grocery chain in my area doesn't allow MO's with debit cards, cash only. The only exception I have discovered is their location in the worst part of town. I just recently discovered they sell MO's for 25 cents and allow debit cards. Great find for me, but I'm not sure why they only let debit cards here out of their dozens of locations in a 60 mile radius. Any theories?
 

StaticCharge

New Member
Any theories?
This may sound classist and judgmental (not my intent), but my guess is that the "bad" part of your town likely has a higher incidence of SNAP recipients, and those benefits are distributed by debit card. It may be that your grocery chain has calculated this and accepted the additional fraud risk (real or perceived) of allowing debit -> MO because that's how a greater portion of the local demographic can pay.

This is only a guess. Whatever the reason, it seems to be a very useful discovery.
 

taxicabnumber

Level 2 Member
This may sound classist and judgmental (not my intent), but my guess is that the "bad" part of your town likely has a higher incidence of SNAP recipients, and those benefits are distributed by debit card. It may be that your grocery chain has calculated this and accepted the additional fraud risk (real or perceived) of allowing debit -> MO because that's how a greater portion of the local demographic can pay.

This is only a guess. Whatever the reason, it seems to be a very useful discovery.
I'm a tad confused by this -- SNAP debit cards are their own thing (i.e., no other funds go on the card), and there are limitations on what you can buy (see e.g. http://www.dummies.com/how-to/content/how-to-use-food-stamps-the-snap-card0.html ). Is the argument that people who use SNAP cards tend to get accustomed to making more frequent debit card purchases in general?
 

MickiSue

Level 2 Member
I wouldn't worry too much about WM losing money on your MSing.

The Walton family are INDIVIDUALLY members of the top ten richest people in the world.

Their business deals have bankrupted other companies, as they sign exclusivity contracts, and then, when they have no other companies buying their products, get squeezed to provide products at lower and lower costs to WM...till they can no longer afford to do business, period. Read about what happened with Huffy bikes, as an example.
 

StaticCharge

New Member
I wouldn't worry too much about WM losing money on your MSing.

The Walton family are INDIVIDUALLY members of the top ten richest people in the world.

Their business deals have bankrupted other companies, as they sign exclusivity contracts, and then, when they have no other companies buying their products, get squeezed to provide products at lower and lower costs to WM...till they can no longer afford to do business, period. Read about what happened with Huffy bikes, as an example.
I don't think anyone in this thread is worried (on any level) about WM losing money. I was wondering out loud if the cash flow generated by MS, now that WM has dipped its toes in banking, would be viewed as encouraging their destructive (my word) behavior. Prevailing opinion seems to be that even increased MS wouldn't even register a blip to WM, and that's probably a fair estimation.
 

StaticCharge

New Member
I'm a tad confused by this -- SNAP debit cards are their own thing (i.e., no other funds go on the card), and there are limitations on what you can buy (see e.g. http://www.dummies.com/how-to/content/how-to-use-food-stamps-the-snap-card0.html ). Is the argument that people who use SNAP cards tend to get accustomed to making more frequent debit card purchases in general?
I don't know if frequency has anything to do with it, and that wasn't my point. I thought the sole location allowing SNAP -> MO might be due to the increased number of customers with SNAP cards. Now that I think about it, I don't know if a MO can be purchased with SNAP. As I said, only a guess.
 
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