Well, it won’t actually be a bank. Because federal regulators, persuaded by small bankers that Wal-Mart could put them out of business, won’t grant Wal-Mart a bank charter.
So the world’s largest retailer has found a workaround: Assemble a package of financial services through deals with third-party partners, and make Wal-Mart a bank in almost every sense but the legal one.
Over the next year, the company plans to introduce a prepaid debit card, intended for low-income consumers, and install money centers — which currently offer check cashing, bill paying and money order services — into at least 1,000 stores, up from 225 now.
The moves are seen as a precursor to even wider offerings, like mortgages and home equity loans, which could turn Wal-Mart into a significant force in the banking world. Jane J. Thompson, the president of Wal-Mart financial services, called the prepaid cards and money center services “foundational products” that the retailer would build upon. “Our concept is to go up the credit ladder of financial services,” she said in an interview.
Ronald K. Ence, vice president for Congressional relations at the Independent Community Bankers of America, a trade group, said Wal-Mart’s intentions suggest that the company misled the public when it said repeatedly that it did not plan to enter the consumer banking business.
“Clearly this was their intention all along,” he said. “The proof is in the pudding.”
“The Bank of Wal-Mart” could be a great convenience for the store chain’s 36 million customers who have no bank accounts. They can transfer their paychecks directly onto pre-paid debit cards and very likely spend big chunks of their low incomes at the store. As for credit cards and loans, what interest rates will Wal-Mart charge these customers? Could putting their financial lives in the retailer’s hands be a trap, as well as a convenience?
Local bankers and others will be watching with concern, as Wal-Mart quadruples the non-branches of its non-banks and gives people who need to watch every penny, incentives to sign up.