Mark Winston Griffith

No Bank Account, No Peace

Two recent announcements reflect a disturbing trend in the financial services industry. An Associated Press article reported that Wal-Mart will begin issuing pre-paid Visa debit cards to their customers. This is the same Wal-Mart that recently abandoned efforts to charter a bank and gain a greater foothold in the financial services industry.

In a parallel development, an international trade association of pre-paid cards announced an “education” offensive, designed to counter negative attitudes towards pre-paid cards. Like the Wal-Mart card, global pre-paid cards are aimed at the “unbanked”. This global trade association is focusing on the fact that their cards can serve as an alternative to remittances by helping migrants send and use money across borders.

On the surface this all might sound innocent enough. But there’s a reason why pre-paid card have received some bad press in the past. Although they are touted as a tool for the “unbanked” they actually do nothing to encourage savings or help the user actually establish a bank account. Pre-paid cards also are not covered with many basic consumer protections that come with bank accounts.

And perhaps most importantly, pre-paid cards can be an expensive habit for users, who incur fees when they load the card with money and every time they use it. It just becomes another way in which poor people pay more for inferior banking services.

Operators in the fringe financial services industry argue that not everyone uses or likes banking accounts and that services like check cashing and the pre-paid cards enable people to escape the hegemony of banks. There actually is a lot of validity to this argument. But as long as banks, credit card companies and pre-paid providers see poor people as a bunch of powerless people who have no alternatives but to buy exploitatively priced products, justice and fairness for the “unbanked” will remain a nice, but fleeting, idea.

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Posted at 8:15 AM, Jun 22, 2007 in Financial Justice
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