Wal-Mart is a very controversial multinational corporation (MNC). Over the years, it has been accused of being the cause of many social and economic problems such as the defeat of local small businesses, poor compensation of its employees, price manipulation, anti-union practices, bribery and corruption (Sethi, 2014). One could think of Wal-Mart as the “anti-CSR” corporation. In fact, the founder of the company, Sam Walton, voiced his disbelief in CSR. He said that the company’s primary duty was to make a profit for its shareholders (Walton and Huey, 1992). However, even Wal-Mart can practice CSR and still make a profit. This blog post is about Wal-Mart’s nontraditional banking business and how it is considered to be a vehicle for economic justice.
In 2007, Wal-Mart opened 1,000 in-house Money Centers targeting consumers who do not have traditional bank accounts and who rely on check-cashing services and payday moneylenders for their financial needs. The Wal-Mart Money Centers charge low fees for their services compared to check-cashing services and payday lenders. Wal-Mart also offers pre-loaded Visa credit cards, and an international money transfer service with fees that are considerably less expensive than those of its competitors like Western Union.
Approximately forty-four percent of the Hispanic/Latino population of the U.S. does not have access to a traditional bank account (Intae and InSoo, 2010). As a result, they are vulnerable to paying high fees at check-cashing services, becoming victims of predatory lending practices, and becoming criminal targets due to carrying large sums of cash or keeping cash at home because of a lack of a bank account or a credit history. The following table illustrates how widespread the problem was back in 2004.
Wal-Mart’s Money Centers enable consumers to not only safely and more cheaply manage their financial transactions, but as Intae and InSoo (2010) discuss in their article on Wal-Mart and CSR, Wal-Mart’s competitive prices in the international remittance service industry helped to lower fees throughout the industry, enabling Hispanic/Latino consumers to transmit money that helps contribute to wealth redistribution, and economic justice in Latin-American countries. Funds sent from immigrants act as a lifeline for the receiving families and communities. According to Lowell (2004), approximately 75% of the money received is spent on necessities such as food, medicine or clothing. A portion of the rest of the money is either saved or invested. Thus, the money saved on fees by remitting funds via the Wal-Mart Money Centers gives more money to the families and communities.
Wal-Mart declines to provide information regarding how much money it makes from financial services (Martin & Clifford, 2011), but the company clearly has a profit-making motive behind the Money Centers. Many of the customers that use the Money Centers stay and shop in Wal-Mart after cashing their checks or transferring their funds.
This case reminded me of some of our discussions around the Nike Corporation and its sport-focused social justice programs (Hayhurst and Szto). Nike and Walmart are both offering a form of social justice. In Wal-Mart’s case, the money saved by immigrant workers that use the Money Center’s financial services helps to provide more money to workers’ families, promotes the well-being of communities, supports micro investments, and helps to improve social conditions in Central and South America. Further, Wal-Mart has used its considerable size and power to force its competitors to lower fees throughout the industry. Wal-Mart, like Nike, clearly believes that CSR should benefit people, but should also be profitable for a corporation.
That said, I am somewhat skeptical about Inate and InSoo’s claim (2010) that Wal-Mart’s Money Centers are represent a true CSR initiative. I think that Wal-Mart set out to establish a new profit-making venture that would draw more customers into its stores and that the economic justice piece was a by product of that venture. However, I do not disagree with the author’s assessment that the Money Centers are helping publics who are underserved by traditional banks and helping to transmit money that is desperately needed to people and communities in under developed countries.
Intae, Y., & InSoo, C. (2010). Wal-Mart’s nontraditional banking business and corporate social responsibility. Social Responsibility Journal, (4), 551. doi:10.1108/17471111011083437
Lowell, L. (2004), ‘‘Immigrant remittances: trends and impacts, here and abroad’’, PowerPoint slides presented at the Federal Reserve Bank of Chicago’s Financial Access for Immigrants: Learning from Diverse Perspectives, April, available at: http://www.chicagofed.org/news_and_conferences/conferences_and_events/files/financial_access_for_immigrants_lowell.pdf (accessed October 11,2007).
Martin, A., & Clifford, S. (2011, November 8). High bank fees give Wal-Mart a money aisle. New York Times, p. 1.
Orzoco, M. (2004), ‘‘Markets and financial democracy: the case for remittance transfers’’, PowerPoint slides presented at the Federal Reserve Bank of Chicago, IL, April 14, available at: http://www.chicagofed.org/news_and_conferences/conferences_and_events/files/financial_access_for_immigrants_orozco.pdf (accessed October 2, 2007).
Prakash, S. (2014). The Wal-Mart affair – where implausible deniability is the coin of the realm. Corporate Governance, (3), 424. doi:10.1108/CG-10-2013-0112
Walton, S. and Huey, J. (1992), Sam Walton, Made in America: My story, Doubleday, New York, NY.