Retailers Get Creative During Tax Refund Season

Navigator Edition: February 2015
By: John Grund and Aaron Mercurio

Walmart’s recently announced partnership with Tax Products Group (a business unit of Green Dot) and Republic Bank and Trust Company, where the tax refund disbursement (in cash) can be delivered to customers in Walmart stores, highlights the value of capturing this seasonal increase in household income.

For context, IRS figures indicate that $275 billion in tax refunds were made in the 2014 tax season1 and those refunds skew toward low to moderate income households, with 65% of refunds issued for those with adjusted gross income below $50,000.2 H&R Block alone handled roughly 1 in every 7 U.S. tax returns – it issued over $9.2 billion in deposits on 2.4 million of its prepaid Emerald MasterCards in 2014.3 The use of promotions or specialized services to attract the purchasing power made possible by a tax refund has evolved over the years with selected offers listed in Figure 1. In past tax seasons, retailers such as Home Depot, Sears, Lowe’s, and many others have used promotions aimed at attracting the purchasing power of tax refunds.

Figure 1: Select Tax Refund Incentives Offers – 2015 Tax Season
Fig-1_-Select-Tax-Refund-Incentives-Offers-–-2015Source: Retailer websites.

The process behind Walmart’s Direct2Cash solution is designed to be relatively simple. Self-filing customers from either of Walmart’s two inaugural partners (Republic Bank and Tax Products Group) prepare and file their taxes using software from these providers, and select Walmart Direct2Cash as their desired refund disbursement method. Customers will then receive an emailed code, which they provide to Walmart along with their ID to collect cash when refund funds become available. These partner providers, Republic Bank and TPG, may charge $0 to $7 for selecting this disbursement option through their services, but Walmart will not charge customers additional fees for Direct2Cash. Public sources indicate that customers’ refunds should be available along the same timing as selecting direct deposit, so the solution is targeted at underbanked consumers.

The Direct2Cash program appears capable of expanding beyond the two inaugural partners, although the largest tax preparation providers have competitive solutions in terms of branded prepaid cards. That said, Walmart’s service is particularly creative in a number of ways:

  • Walmart is offering a cash refund granting customers immediate liquidity and spending power;
  • Walmart’s solution provides an alternative to more expensive traditional check cashing solutions; and
  • Walmart can and will compete on price – the prize for Walmart is store traffic and the potential to capture its share of retail spend.

The low to moderate income household segment was hit the hardest in the recession and has been slow to recover. It is routinely cited by economists that the tax refund is the single largest ‘paycheck’ for the average American Family. There has never been a better time for retailers that are dependent on those households to look at new ways to save customers time and money while increasing the likelihood of capturing a fair share of spending during the tax season.

1 As of May 16, 2014 per IRS data.
2 As of May 12, 2014 per IRS data.
3 As of fiscal year ended April 30, 2014, per H&R Block annual report.

For more information, please contact John Grund, Partner,; or Aaron Mercurio, Senior Consultant, Both specialize in Credit Card Issuing.

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