Is Walmart Becoming A Bank?

UPDATE: Walmart has responded. They are abandoning their plan to become a bank. Caught!

Congressman Paul Gillmor, (R-Ohio) contends that Walmart, despite assurances by the retailer that they merely want to open a credit card processing division to save some money, secretly intends to become a full scale retail banking enterprise. To support his claims Gillmor released a Walmart email in which they discuss lease terms with banks that rent space from and operate within Walmart.

From Businessweek:

“The terms reserve Wal-Mart’s right to offer an array of future financial services in its stores.

The lease terms in the e-mail say Wal-Mart can offer future services including mortgages, consumer loans, home equity loans, investment and insurance products and any other type of service or product that Wal-Mart might develop.

“The only reasonable explanation of Wal-Mart’s recent plan to revise its leases is that it plans to enter into full-scale banking,” Gillmor said at a news conference in Washington. “This latest information is the smoking gun of Wal-Mart’s dishonesty and deception.”

Wal-Mart told the FDIC last year that it wants to open an “industrial loan corporation” for the sole purpose of saving money that it now pays outside banks that process millions of payments in Wal-Mart stores by credit card, debit card or electronic check.

“The Bank has made repeated public commitments that it will not branch, and its business plan includes neither lending nor retail deposit gathering,” the retailer said in written testimony.

Can you imagine being in debt to Walmart? We’d rather not. —MEGHANN MARCO

Wal-Mart blasted by congressman [BusinessWeek]
(Photo: aka Kath)

Comments

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  1. patoco12 says:

    Yes, I know. I’m going to be accused of being a mouthpiece for Wal-Mart, but somebody has to stick up for them.

    Wouldn’t Wal-Mart being in the banking industry be a good thing for people who don’t belong to a Credit Union? Force the Bank of Americas and the Wells Fargos to compete?

  2. Manue says:

    TD Canada Trust was in Canadian Walmarts for a while… but finally, it was not good enough business I guess, because they stopped.

  3. FastFords says:

    I agree with patoco12. I am in a credit union and back with Wachovia. Other that free checking Wachovia can’t compete. A Wally World Back may help everyone.

  4. twigg says:

    I’d imagine these kinds of lease terms can’t be uncommon for any corporate behemoth whether or not they plan to offer banking services, but just to protect their own interests.

    Nonetheless, Wal-Mart apparently has plans to offer banking services in Mexico later this year and has attemped to buy at least one bank (but foiled by banking regulators) back in 2000.

    And I feel like I’ve read about this kind of thing several times before, once as recently as this past summer.

  5. redcorsair says:

    Wal-Mart has a bank. You probably just haven’t heard of it. It is called Arvest and it services Northwest Arkansas, Northeast Oklahoma, and Southern Missouri. And it is owned by the Walton family.

  6. AcilletaM says:

    Umm, aren’t the Bank of Americas and Wells Fargoes already competing?

  7. stuflustr says:

    Yeah, we don’t want big bad Walmart picking on those defenseless banks. If the banks weren’t allowed to reap record profits year after year, why, that’d be downright unamerican.

    If walmart actually hurt the big banks, I’d see them in a new light. But that’s just because I hate the banks more than walmart.

  8. FLConsumer says:

    Wal-Mart Bank? That’d be a hoot!

    1) There would be 36 teller windows with only 1 open and a line of 15 people waiting.

    2) Every 15-30 minutes, the teller would suddenly close her window without mentioning anything to those currently waiting… another 30-90 seconds later, another window would open up and people who just got in line would run over to the new window, leaving yourself screwed.

    3) The tellers would be the same inept/strange-looking cashiers & cust. disservice agents you love to hate about Wal-Mart. Imagine these people handling your finances.

    4) The “bank” would be found at the back of the store, next to the McDonald’s.

    5) There would be no drive-thru, see #4

    6) All fees would be $4 per fee/transaction. Even if it cost less or is free elsewhere, every single transaction at the Wal-Mart bank will be $4.

    7) There’d be a useless Wal-Mart Bank Greeter at the front of the line. Rather than hire an additional teller, we’ll put some old fart up at the beginning of the line to harass you.

    8) Sam’s Club Bank locations only — there’ll be yet another strange-looking, non-English speaking person waiting for you by the door (besides the greeter). This person will ask to see your cash and receipts. They’ll either A) won’t look at anything and mark your receipt or B) will insist that your $20 is actually $40 and refuse to let you leave the building.

    9) Wal-Mart Bank locations only — As you try to leave, the security system will start sounding and the old fart greeter will wander over and insist you’ve robbed the bank.

    10) There’d be TV screens all over the waiting line, advertising god knows what, but the volume would be way too loud.

    Anyone care to add to the list?

  9. Falconfire says:

    @patoco12: Not if Wallyworld ended up being just as evil as the non-credit unions which they wouldnt be getting into the banking world if they had ever had a intention of not being evil.

  10. latemodel says:

    WalMart should be allowed in the banking industry because the FDIC has allowed WalMarts competitors to do so, specifically Target.

  11. mac-phisto says:

    @stuflustr: they wouldn’t hurt the big banks, but guaranteed you can kiss your local savings bank, mutual thrifts & credit unions goodbye.

    this is no big news. wal-mart actually applied for a credit union charter a couple years back. they want into the financial service industry – bad.

    wal-mart’s history of predatory practices & quest for complete market dominance should be reason enough to deny an application. lucky for us, the wall between commerce & finance stands…for now.

    there are efforts underway to make it impossible for a company to buy an ilo unless a great majority of their business comes from financial business anyway. this is important, because there are an array of rules that require financial institutions to be “smarter” about investing, so as to maintain their fiduciary responsibility. there are many investments that banks are not allowed to risk their money on, including retail stocks. technically, a wal-mart owned bank would essentially mean a bank whose investments are responsible to the productivity & profitability of the wal-mart empire. wal-mart goes under, bank goes belly up. that’s unsound.

  12. ColdNorth says:

    Why is it that so many people seem to be against a company making a profit? What is the purpose of a company BUT to make a profit? The company performs a service and receives valuable consideration (MONEY) for rendering that service.

    As long as prices/fees are clearly disclosed, a consumer decides if they want to pay the price for said service at said location. If not, they shop elsewhere. That’s what a free market is all about.

    This thread is a perfect example of what I’m talking about: First, it is a slam on Wal-Mart for wanting into the banking industry. THEN it becomes a slam on the traditional banks for charging fees for their services. What would the readership offer as a third route? The magic jellybean bank where all banking is free and the loan rates are 0%?

    I’m not a banker and I’m not a Wal-mart shopper. I just don’t understand what some of the readers on this site are expecting from business… I thought this site was all about highligting defective, negligent or fraudulent consumer practices by businesses. Sometimes I think it’s more about people whining about how they can’t get their free lunch from those SOB money-making, good-for-nothing companies.

    Soapbox mode *off*.

  13. mac-phisto says:

    @latemodel: target’s bank has been chartered to offer business credit cards. that’s it. now it’s true that banks change charters quite frequently, & this gives target a step-in towards higher levels of banking, but it’s completely different than what wal-mart wants. wal-mart wants to bypass interchange fees with an ilc, & then get into consumer lending & transactional business.

    the stability of our entire banking system is reliant on the idea that the mode of commerce is separate from the commerce itself. it assures that banks & money will survive despite changes within commercial markets. breaching that could have dire consequences for all consumers.

  14. rekoil says:

    Wal-Mart withdraws industrial banking push

    Looks like Wal-Mart’s bluff has been called…

  15. Sudonum says:

    @mac-phisto:
    ummm….. Target also offers consumer credit cards. I know because my wife has one.

    And I’m not a banker, but I believe that the prohibition on certain kinds of investments that banks can make is predicated on the fact that they offer FDIC deposit insurance. What would prevent Walmart from declining to offer their depositors FDIC and making whatever investments they want? Granted it would not be wise for a customer to make a deposit in a non-FDIC insured bank. But if Walmart offered a higher interest rates on deposits like some non-insured brokerage accounts they could have plenty of takers.

  16. mac-phisto says:

    @Sudonum: i believe target visa is a separate entity from target bank. & if you read this article http://www.businessweek.com/magazine/content/06_29/b399304… you may see why retailers running financial portfolios is not the greatest of ideas.

    the prohibition does indeed correlate to fdic insurance (or ncua insurance if you are a credit union). i guess technically a company could process transactions like a bank without this insurance, but they wouldn’t be a bank. banks & credit unions are regulated by state & federal departments that require fdic or ncua insurance. failure to fund capital reserves sufficient to insure deposits up to the amount required by law violates fed reg H or Y (depending on whether you are a bank or a bank-holding company).

    so, in short, no insurance = no bank.

  17. latemodel says:

    I dont think banks are required to have FDIC coverage. I believe the FDIC recommends that customers check that the business they are giving their money to is insured. Maybe you need FDIC coverage to be a national bank.

  18. acambras says:

    @FLConsumer:

    6) All fees would be $4 per fee/transaction. Even if it cost less or is free elsewhere, every single transaction at the Wal-Mart bank will be $4.

    Naw, I bet they’ll be $3.97.

  19. Sudonum says:

    @mac-phisto: I’m not debating whether it’s wise for a retail operation to offer financial services. My question is how can Target offer a Visa card that is not issued through a 3rd party bank? The issuing bank for her Vias is Target National Bank. Why is it fair for Target and not for Walmart? Becasue consumers tend to have a higher opinion of Target?

  20. FLConsumer says:

    @acambras:
    I’ve not been in Mal-Wart in years… but you’re probably right, it wouldn’t be a full dollar amount. I got the $4 figure from their generic prescription drug PR lit.

  21. FLConsumer says:

    Latest news: Mal-Wart’s dropping their bid to become a bank:
    http://biz.yahoo.com/ap/070316/wal_mart_bank.html?.v=8

  22. mac-phisto says:

    @Sudonum: wal-mart is not looking to charter an ilc for credit card services (evidently, now they are not looking to charter at all, so it’s a moot point), they were looking to process pos transactions (commercial banking) & eventually get into retail banking. i’m sure if all they wanted to do was offer credit cards, they wouldn’t have had any trouble getting their charter approved.

  23. Jason-Ryan-Isaksen says:

    Yes I remember when this was news years ago. They said in their statement they just wanted to provide basic bank services to get approved. Then they wanted to do a host of other things which would get them into scrutiny they wouldn’t get approved for. Nice spin on that letter saying it would take years and they couldn’t provide cheap and easy enough services, oh that’s rich.

    Walmart has banks in their stores, but they wanted the whole pie. They wanted to be a bank with loan services and the rest. When it looked like they wouldn’t get approved they gave up.

    Jason Isaksen