by Thom Forbes , Featured Columnist @tforbes, April 18, 2014

Imagine you’re selling something for $85 and Walmart comes along and says it’s going to offer an identical service for under $10. That’s an extreme example of what happened yesterday when the retailer announced plans to get into the money transfer business, undercutting the fees charged by the two big players in the game, Western Union and MoneyGram.

“The company is partnering with Ria Money Transfer to launch Walmart-2-Walmart Money Transfer Service, allowing customers to transfer as much as $50 for a $4.50 fee, and up to $900 for a $9.50 fee from more than 4,000 of its stores,” reports CNBC’s Krystina Gustafson.

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Ria is a subsidiary of Euronet Worldwide, which is based in Leawood Kansas. There is a $900 daily transfer limit per customer.

“Walmart-2-Walmart brings new competition and transparent, everyday low prices to a market that has become complicated and costly for our customers,” Daniel Eckert, SVP of services for Walmart U.S. said in a statement. “We’re doing what we do best — launching a new service that challenges the status quo and drives down prices for our customers.”

The service will only be available in the U.S. — at least for now. The statement puts competitors’ fees for transferring $800 to $900 at $57 to $76. But “Western Union on its website puts the price of transferring $900 in New York between $20, if using a bank account, to $85 if using a credit or debit card,” points out the AP’s Anne D'Innocenzio in USA Today.

Dallas-based MoneyGram, which has provided money-transfer services in Wal-Mart stores since 2001, “said it was surprised by the move,” according toThe Wall Street Journal’s Paul Ziobro and Anna Prior. Its share plummeted 17.7% while Western Union fell 5%.

The new service will compete with the existing MoneyGram service, “fueling speculation over the future of their contract,” Forbes’ Clare O’Connor observes.

In a conference call with analysts Thursday morning that MoneyGram said it would post to the Investor Relations portion of its website but had not as of Friday morning, chairman and CEO Pamela H. Patsley “said there are no immediate plans to match Walmart’s prices at the stores or at other U.S. locations,” Hanah Cho writes in the Dallas Morning News. “Patsley noted that the price difference is 25 cents for money transfers up to $50 and $2 for transfers between $50 and $200.”

For its part, “Western Union said it was well-positioned in the business, saying it offered services through a network of about 46,000 agents in the United States alone,” reports Reuters’ Phil Wahba, who notes that “U.S. domestic money transfer represents about 8% of its total 2013 revenue.”

Andrew Jeffrey thinks Walmart-2-Walmart “casts a pall over Western Union's pricing model and long-term organic revenue growth outlook” while Sterne Agee analyst Jennifer Dugan doesn’t believe it will “have a significant impact on Western Union's market share and average pricing,” Wahba reports.

Walmart itself points out in its release that “almost 28% of Americans are classified as either underbanked or unbanked, with millions using money transfers as a critical part of maintaining household budgets or helping friends and family in times of crisis.” It cites military families and oil field workers as primary targets.

“Walmart’s latest initiative is savvy,” writes Forbes’ O’Connor, given the high percentage of low-income families who often “rely on costly alternative financial services, like short-term, high-interest ‘payday loans’ offered by companies targeting those on the fringes of the banking system.”

“The new service brings Wal-Mart even deeper into the business of providing traditional banking services even though the company technically isn't a bank,” write the WSJ’s Ziobro and Prior. “Wal-Mart offers check cashing, bill paying, money orders and tax-preparation services, as well as prepaid card programs, to its core low-income customers, many of whom are left out of the traditional banking system. The retailer still doesn't provide other key banking services such as taking deposits or making loans.”

Walmart isn’t the only retailer encroaching on territory once dominated by banks, Elizabeth A. Harris points out in the New York Times. “Costco offers mortgages, for example, and Home Depot provides loans to help customers finance improvement projects,” she writes. “Walmart actually sought a banking charter for years before abandoning the effort in 2007.”

“In many cases, these services crop up in response to demand, but it’s also a space that’s less regulated,” Consumers Union staff lawyer Suzanne Martindale tells Harris. “There may be weak protections or a patchwork of protections.”

Guys with crooked noses have known that for years, and their rates tend to be a lot higher and collection techniques more extreme.