October 5, 2014 • Alaska Journal of Commerce
• Page 9
COMMERCE CORNER Walmart’s mobile checking account nixes fees By Joseph Pisani AP Business Writer
NEW YORK (AP) — Walmart is the latest company to get rid of fees that traditional banks charge customers who don’t have enough money in their accounts to cover purchases. The world’s largest retailer said Sept. 24 that it teamed up with Green Dot Corp., a company known for its reloadable prepaid cards, to bring mobile checking accounts to its shoppers. The accounts won’t charge overdraft and bounced-check fees. It’s the latest attempt to offer banking services that cater to cash-strapped Americans who are still struggling in the economic recovery. Bank of America and Citibank both launched checking accounts this year that don’t charge overdraft fees, which can normally cost up to $35 per transaction. The moves come as overdraft fees, which occur when a customer doesn’t have enough cash in their account to cover a purchase, have come under increasing scrutiny by regulators in the past few years. In 2010, banks were required to get written approval from customers to provide overdraft protection, which allow balances to go below zero. But those that opt for overdraft coverage are still paying high fees: Some customers at large banks can pay, on average, almost $260 a year in overdraft fees, according to the Consumer Financial Protection Bureau. Green Dot’s account, called GoBank, has a monthly fee of $8.95. But that can be waived if a direct deposit of $500 is made each month. To open an account, customers need to go to a Walmart store and pay $2.95 for a starter kit. They must also own a smartphone, since most of the banking is done through the app. The kit comes with a MasterCard debit card that can be used to make purchases or to take out
Photo/April L. Brown/AP
Wal-Mart Stores Inc. announced Sept. 24 it will offer checking accounts that won’t have overdraft and bounced check fees, nor will require credit bureau ratings to determine eligibility.
money, for no fee, at more than 42,000 ATMs around the country. Using an ATM outside the network will result in a $2.50 charge. There’s also a 3 percent fee for money taken out at an ATM outside of the country. And to attract people with poor credit scores and little money, Walmart said that credit bureau ratings and other scores typically used to determine eligibility are not part of the process. Daniel Eckert, senior vice president of services for Walmart U.S., said that the retailer’s customers “feel they just aren’t getting value from traditional banking because of high fees.” Walmart’s move follows similar ones by big banks. Bank of America launched its
SafeBalance account, which has a monthly fee of $4.95 and no overdraft fees. And Citibank’s Access Account, launched Sept. 23, has a monthly fee of $10 that can be waived if customers make one monthly bill payment or one direct deposit or if they average a monthly balance of $1,500 or more. The Citibank accounts don’t charge overdraft fees either. Greg McBride, chief financial analyst at Bankrate.com, said it is unlikely Walmart will be able to steal customers from big banks. People who do sign up for GoBank are likely to not have a checking account or are unable to open one, he said. “The goal here is to get them in the store and boost traffic and sales in the store,” said McBride.
The account also comes with perks. To make a cash deposit, GoBank customers can go to the register of any Walmart store. GoBank customers also can receive payroll direct deposit earlier than their normal payday if their employer notifies GoBank of a deposit in advance. The app notifies customers in real time if a purchase they are about to make falls outside of their budget. A “Fortune Teller” feature crosschecks the price of a particular item against a customer’s planned income and other expenses. In addition, customers can send money instantly to each other at no charge through either email or a text message.
‘Bond King’ Gross leaves Pimco, joins Janus Capital Group By Steve Rothwell and Bernard Condon AP Business Writers
NEW YORK (AP) — The biggest star in the bond market shocked the financial world Sept. 26 by leaving the huge money management firm he has led for four decades and joining a much smaller rival. Bill Gross, who co-founded the investment giant Pimco in 1971 and runs its $222 billion Total Return Fund, said he would join Janus Capital Group. The prospect that investors would follow the guru-like fund manager and pull their money out of Pimco sent the stocks of several rival investment companies soaring. Janus jumped 43 percent. Allianz, the German company that owns Pimco, dropped 6 percent. “Many people invested in Pimco’s Total Return know Bill Gross, and they want his expertise,” said Todd Rosenbluth, director of fund research at S&P Capital IQ. “Money will leave Pimco. It’s just a question of how much.” Gross has trounced rivals for years with deft moves in and out of bonds, earning the title “Bond King” and attracting hundreds of billions of dollars into Pacific Investment Management Co. But lately his performance has lagged that of many rivals and his management style has raised eyebrows. Gross will oversee bond investments at Janus and run a
recently launched fund called the Unconstrained Bond Fund from a new office in Newport Beach, California. He started at Janus, which is based in Denver, on Sept. 29. Gross writes monthly commentaries on markets that are widely quoted, and his utterances on business TV shows can move markets. But for all his star power, Pimco’s flagship Total Return hasn’t fared well recently. The fund lost 2.3 percent last year, its first loss in more than a decade, according to S&P Capital IQ. It’s done better this year, returning 3 percent. Still, that is half of a point less than the average bond fund. In addition to lackluster results, investors have been rattled by reports of a regulatory probe into the way Pimco has been valuing bonds in a smaller fund and by management turmoil at the company. In January, Gross’ heir apparent, Mohamed El-Erian, abruptly resigned. Investors have pulled money out of the Total Return Fund for 15 months in a row, according to S&P Capital IQ. Morningstar, a fund rating firm, put all of Pimco’s funds under review on Sept. 26, and financial analysts scurried to assess the impact of Gross’s departure on Pimco’s business. A report from Bernstein Research estimated that Pimco could lose as much as 30 percent of the money in its funds as investors follow Gross to Janus, or put their money elsewhere. “We would expect a good deal of Pimco clients switching to Janus, simply attracted by the long track record of Bill Gross,” wrote the analysts led by London-based Thomas Seidl. Other large bond managers, including BlackRock and Legg Mason, would also likely benefits from Gross’s move, said Daniel Fannon at Jefferies. Rosenbluth of S&P Capital IQ said that he expected star
bond performers elsewhere to also attract investor money, among them Jeffrey Gundlach, who runs DoubleLine’s Total Return Bond fund. It has returned 5.5 percent in the eight months through August, according to Morningstar. In announcing Gross’ move, Pimco CEO Douglas Hodge alluded to tension between Gross and top managers. In the past year, “it became increasingly clear that the firm’s leadership and Bill have fundamental differences about how to take Pimco forward,” Hodge wrote. He added that the company has a “deep bench of talent” and expects a “seamless leadership transition.” For his part, Gross noted in a statement he was looking forward to not having to face “many of the complexities that go with managing a large, complicated organization.” Gross was one of the founders of Pimco and helped build the Newport Beach, California-based investment company into one of the world’s largest bond managers. Today, the company manages almost $2 trillion in assets. Gross and El-Erian, co-chief investment officer before his departure, helped steer the company through the tumult of the financial crisis. The two helped develop Pimco’s concept of the “new normal,” a widely cited idea that economies will grow more slowly after the crisis and big investment returns will be hard to come by. Snagging Gross is a “big coup” for Janus, according to a note to investors by Greggory Warren, a senior analyst at Morningstar. Warren said it would allow Janus to attract money to its fixed income funds, which currently total $31.4 billion, a fraction of Pimco’s. Janus stock soared $4.78 to $15.89. Legg Mason rose $2.09, or 4 percent, to $50.77 and BlackRock increased $13.55, or 4 percent, to $335.07.