Kmart to Offer In-Store Bill Pay

NEW YORK (MainStreet) – Banks may not like it, but “Blue Light” shoppers likely will appreciate an aggressive new campaign from retail giant Kmart and Western Union to pay bills – and even mortgages – directly to vendors right there in the store.

With chief rival Wal-Mart already running its own bill payment system, Kmart needs all the help it can get - Kmart’s same-store sales were fairly tepid in 2010, rising by 0.7% for the year and by 2.5% in the fourth quarter.

The Western Union bill payment service, announced in April, could fit the bill. The service itself is light on paperwork and comprehensive, offering shoppers a way to pay a wide variety of bills on store premises like auto, mortgage, utility, credit card and phone and Internet bills. The bill payment service is available at every one of Kmart’s 1,200 stores across the U.S.

“Western Union’s enhanced bill-pay service provides a full slate of billers to pay with greater ease than before,” says Dave Schuvie, vice president of licensed businesses at Sears Holdings (Stock Quote: SHLD), which owns Kmart. “Not only do consumers benefit, but our associates also appreciate the streamlined, shortened payment process.”

Kmart says the Western Union bill payment service can help consumers in multiple ways:

Users can avoid high electronic bill payment transaction fees
Users can pay bills at the last minute, up to the day the bill is due
Users can walk away with a receipt confirming their bill payment
Users can pay bills to both local and national companies
Users can find and identify billers more easily (no "code cities"), while providing flexible payment delivery speeds

Western Union typically charges about $1.50 per customer bill payment transaction, which is moderately lower than the $3 or so that creditors routinely charge for electronic bill payment services. But those services are only for people with actual bank accounts.

Kmart and Western Union allow those without bank accounts to pay their bills at the store, and that could be a pretty big demographic – the Federal Deposit Insurance Corporation (FDIC) reported in 2009 that up to 35 million Americans didn’t have a bank account. Presumably, many of those are low-income families that would be a natural draw to a low-cost retailer like Kmart.

With Wal-Mart (Stock Quote: WMT) and Kmart now offering in-store bill pay, that’s one more brick in the wall that’s keeping customers away from traditional banks, and a brick that could further reduce bank revenues in already tough economy.