The store within a store (SWAS) concept has been around for a long time and demands continuous experimentation by retailers. Think CVS Pharmacy inside of Target, Starbucks at Safeway, or Petco at Lowe’s. All of these share the commonality of a brick and mortar location embedded within a larger brick and mortar retailer — helping drive foot traffic to the store and, ideally, increasing revenue per square foot. These partnerships take major investment by both parties, including the physical overhaul of precious square footage, staff training, and customer marketing.
There’s another long standing way that retailers have drawn customers through their doors to reach the same mutual goals: Financial services.
While some retailer relationships with financial services providers go back to the 1980s, like Kroger and Western Union (WU), there are more innovative, efficient ways for retailers to execute this concept today. In this article, we’ll explore how retailers have worked with money transmitters like WU, Ria, and MoneyGram to draw customers to their stores, and how embedded financial technology makes coveted services like remittances more accessible to customers, simpler to implement for stores, and less burdensome to frontline employees.
The rising demand for remittances
Today, growth in cross-border remittances has reached $860 billion worldwide, with the United States as the single largest source country according to World Bank. While India, Mexico, and China are the top three recipient countries worldwide, Mexico is by far the top country receiving remittances from the United States (Congressional Research Services). However, nearly 75 percent of Mexican immigrants in the United States are unbanked (FDIC), which leaves them looking for alternative methods to transfer money back home to loved ones.
While India, Mexico, and China are the top three recipient countries worldwide, Mexico is by far the top country receiving remittances from the United States.
That’s where retailers can step in to fill a critical need for their customers — particularly among the underbanked, unbanked, and immigrant populations.
The Mastercard Borderless Payments Report 2023, which sheds light on the cross-border and domestic payment experiences of more than 11,000 participants in 15 countries, reveals that 44 percent of remittance senders in the U.S. intend to increase the frequency of transactions over the next 12 months. Further, the survey finds that when consumers choose a remittance transfer provider for cross-border payments, the three most important factors in their decision are:
- Low fees
- Speed of delivery
- Ease of use
Through partnership with licensed money transmitters, retailers can compete on these factors to create a fast, low-cost, and customer-friendly experience that draws more shoppers to their stores and apps to send remittances.
For retailers in Mexico and other remittance-receiving markets, there’s an opportunity to bring the remittance experience in-store. In fact, the Mastercard report goes on to say that more than one third of those surveyed said their families back home have limited options to access the money they send, and nearly one in four agree their family must travel a long way to access their funds. A retailer with thousands of existing brick & mortar locations, like a convenience store, could stand out by offering same-day cash pickup to customers inside their stores.
"The way we’ve always done it"
It’s Friday afternoon. The money services counter at the grocery store or check cashing location has a line out the door. There’s one person working the counter, and each customer has a paper form to fill out.
While that painstaking experience may not be part of your day-to-day, for many unbanked and underbanked customers, it’s the weekly routine. But, it doesn’t have to be.
Retailers that have historically worked with money transmitters, like those highlighted below, may be all too familiar with this scenario and actively be searching for ways to address the pain points of this poor customer experience for in-store money services. On the other hand, retailers that haven’t dedicated square footage to remittances in their stores yet, but are eager to capitalize on the opportunity to bring more customers in and earn additional revenue, can learn from what has and hasn’t worked in these programs to date.
Walmart launched the Walmart2Walmart Money Transfer Service in 2014, allowing customers to transfer money domestically in the U.S. to their stores. The company lived into their everyday low prices ethos with a simpler fee structure than similar money transfer services.
Today, Walmart also offers low cost cross-border transfers through its Ria partnership, among others. Importantly, Walmart takes advantage of a store footprint on both sides of the U.S.-Mexico border by encouraging Walmart2Walmart transactions, where U.S. customers can send money from inside a local Walmart, then their loved ones can pick up the cash inside of a Walmart in Mexico.
Dollar General began working with Western Union in 2019 to offer money transfer services inside its U.S. stores. The transaction starts in the WU® app or WU.com, then the sender visits a Dollar General store to provide their payment by cash or debit card. Money can be sent to any Western Union agent around the world.
Kroger is the largest grocer in the U.S., operating regional brands like Kings Soopers, City Market, Harris Teeter, and Fred Meyer. The company offers a range of Money Services in more than 2,000 stores, including the ability for customers to transfer money abroad. Their relationship with Western Union for cross-border money transfers dates back to 1985.
For stores with even less floor space than Walmart, Dollar General, or Kroger, like convenience stores, maximizing the assortment and revenue per square foot is a constant challenge. Some c-stores offer money transfers today, but there’s a financial service they and nearly every other retailer have long included: Access to cash via the ATM. This can draw customers into a store they may not have otherwise visited, plus requires minimal human interaction and a relatively small footprint in the planogram.
What to know before adding remittance
Cash-to-cash capabilities
Over 50 percent of all global remittances are paid to unbanked or underbanked individuals in need of a cash payout option, according to Mastercard. This underscores the need to make cash pickup available to recipients, in addition to digital options and bank account deposits. Plus, many senders in the United States earn their wages and manage finances in cash, making it imperative for any U.S.-based retailer offering remittances to have a payment option in cash. Such cash-to-cash capabilities, where the transaction originates in cash in the U.S. and is ultimately paid out in cash abroad, ensures that key consumer needs are met, and there will be an in-person payment or payout – which drives trips to the store.
Over 50 percent of all global remittances are paid to unbanked or underbanked individuals in need of a cash payout option.
Unified retail experience
The experts at Shoptalk describe the cohesive and seamless shopping experience for customers, which demands moving effortlessly and continuously between stores and the digital world, as unified retail. Retailers that value creating unified retail experiences should look for a remittance transfer provider that will build bespoke, white-label solutions for embedding remittances. In practice, this can look like the end-to-end money transfer process taking place through the retailer’s app or brick & mortar store. That keeps the brand top-of-mind through the entire experience, rather than driving customers to a third-party financial services provider, like the Western Union app.
POS systems & store infrastructure
Retailers eager to draw customers into stores through money services will need to consider how their existing infrastructure can support such new capabilities. Ideally, existing point of sale (POS) systems can be used to complete a customer payment, whether by cash or card. That eliminates the need for separate, dedicated square footage allocated to a money services counter. For example, a customer who wants to send a remittance of $200 could initiate it through the retailer app, then generate a scannable barcode or QR code. A cashier scans the code, requests the payment of $200 plus associated fees, and the customer pays for the transaction as they would any other item from the retailer. There’s also potential for humanless interaction at the point of sale. To maximize the existing store infrastructure, retailers can look for a framework agnostic technology provider to integrate with existing front-end systems.
Licensed money transmitter
Working with a remittance provider that has secured money transmission licenses (MTLs) is not a new consideration for retailers, it’s table stakes. In the United States, a money transmitter is a Money Services Business (MSB) registered with the federal U.S. Treasury’s Financial Crimes Enforcement Network (FinCen). However, there is no federal licensure for money transmission, so MSBs must work with regulators state-by-state to secure licenses that allow them to move money domestically, and from the U.S. to other countries. Retailers should ensure that any embedded remittance partner is licensed and regulated in the geographies where they operate, which safeguards the enterprise. Further, a licensed financial institution should have an Anti-Money Laundering (AML) program following Know Your Customer (KYC) best practices as set forth by the Money Services Business Administration (MSBA).
Loyalty & payments expansion
Forward-thinking retailers may want to enhance loyalty programs and optimize payment operations, leveraging financial capabilities that go beyond remittances from a licensed money transmitter. In addition to global money transfers, an embedded finance provider offering virtual wallets or branded cards could enable the retailer’s roadmap for the long term. Wallets and cards can complement remittances by allowing customers to store, manage, and send funds within the unified retail experience. For the retailer, they offer additional engagement opportunities, and can minimize the cost of payment processing through wallet transactions.
Ten questions to ask potential vendors
The Buyer’s Guide is a valuable resource to understand operating models for embedding financial products and, importantly, questions to ask any vendor. Specific to remittance for retail, here are ten questions for retailers to consider:
- Can you support cash-to-cash remittances?
- In what countries can a recipient pick up cash?
- What is the role of the retail brand in the customer experience, both online and in-store?
- How does your technology work with our existing POS systems?
- What kind of training and expertise is required by in-store staff?
- Is your business a licensed money transmitter throughout the United States?
- How does your business ensure compliance in all transactions?
- What platform capabilities do you offer that can enhance customer loyalty?
- Is there a way to save on payment processing costs from in-store transactions?
- What kind of support do you provide during launch and rollout?
There are a number of ways the retailers can embed financial services overall and remittances in particular into a unified retail experience, driving more in-store traffic, increasing revenue per square foot, and earning ancillary revenue. Alviere takes a strategic approach to working with retail clients like Coppel throughout the program lifecycle to deliver a profitable, sustainable business that can evolve over time. Learn more about the resources, milestones, and expertise from our team in the full Launch Guide: Expert guidance for enterprise embedded finance programs.
