Shares of MoneyGram and Western Union plunged almost immediately after the announcement. (Agencies)
The service, which will be available starting April 24, allows its customers to transfer up to USD 900 to and from more than 4,000 Wal-Mart stores in the US.
It's a huge footprint that could reshape that industry and is likely to set off a pricing battle. Customers can transfer up to USD 50 for a USD 4.50 service fee and up to USD 900 for USD 9.50.
According to Wal-Mart comparable services elsewhere cost up to USD 70 when transferring less than USD 1,000.
Western Union on its website puts the price of transferring USD 900 in New York between USD 20 if using a bank account to USD 85 if using a credit or debit card.
Wal-Mart is creating an expanding menu of financial offerings for customers, particularly for those with limited exposure to banks. Wal-Mart already offers prepaid debit cards and tax preparation services.
Shares of MoneyGram International Inc. which could get hit the hardest fell more than 15 per cent to USD 15.25 in midday trading. MoneyGram is the company that currently provides money transfers to Wal-Mart. The stock of Western Union Co., its rival, fell nearly 6 per cent to USD 15.19.
MoneyGram could not be reached immediately for comment.
But in a statement emailed to The Associated Press, Western Union said, "Our retail product and service offerings today are already quite diverse. "
It noted that people have the flexibility to send money in minutes or next day from a retail agent location or online and they can also send money directly into a bank account.
"The company is well positioned in the US domestic money transfer space, having offered a fee of USD 5 for USD 50 since 2009," it added.
Wal-Mart is aggressively trying to increase foot traffic in its stores after seeing comparable-store sales decline for four consecutive quarters.
The Walmart-2-Walmart service may help stem that trend, giving customers just one more reason to spend more time inside Wal-Mart.
Shares of MoneyGram and Western Union plunged almost immediately after the announcement.