Here’s something you can take to the bank: the banking industry in America will suffer if the world’s largest retailer is allowed to cross the line into financial services. In my book, “The Case Against Wal-Mart”, I wrote about Jim Walton’s Arvest banking empire, started when daddy Sam Walton bought the Bank of Bentonville, shortly before opening his first Wal-Mart. For years, Wal-Mart has been trying to break into banking in a more direct way. They tried in Oklahoma, they tried in Canada, and in California, but now Wal-Mart has turned its green eyeshades on Utah. In mid July, Wal-Mart submitted an application to the Utah Department of Financial Institutions to establish an industrial bank in Utah. The retailer claims its Utah bank will only process credit cards, debit cards, and electronic check transactions from its retail stores. Wal-Mart currently uses a third party to handle these transactions. The company says if a Wal-Mart bank could do these activities directly, “It will be a significant savings when you add up the fractional savings on millions and hundreds of millions of transactions that can be paid to Wal-Mart Bank instead of a money center bank.” But a Wal-Mart bank doesn’t sit well with the Independent Community Bankers of America. “The chairman of Wal-Mart has indicated that the next major growth area for Wal-Mart was financial services,” Ronald K. Ence, vice president at the ICBA, told the Deseret News. “He made it very clear that from a corporate standpoint, the company was interested in expanding into financial services, and he didn’t indicate that its interest would be ‘limited.’ It sounds like a very aggressive corporate philosophy that is inconsistent with the philosophy that they’re only interested in a very limited, back-office banking operation.” Independent bankers warn that Wal-Mart will try to drive out other bankers, controlling more and more of the home mortgage, business and car loan industry. “The largest company in the world would certainly have the financial resources to drive other competitors out of the market,” Ence said. “Although all merchants are important in a community, we feel that community banks serve a role greater than one might expect from a financial institution of its size in that they support local merchants and local projects. We’re just not sure that, on top of everything else, a branch of a nationwide, 50-state bank would share that local focus.” Wal-Mart has tried to back its way into full financial services. It recently unveiled a no-fee Wal-Mart Discover credit card that offers 1% cash back, using MoneyGram International and SunTrust Banks to offer services like money orders and wire transfers. Wal-Mart claims it is not trying to become a full banking outlet. “Wal-Mart will not compete with local banks,” the company told the News. “It will not offer loans. It will not set up branches. It will not have any real ‘face’ to the consumers. It will be a single office, located in a downtown or near-downtown office building.” There are currently 29 chartered industrial banks in Utah.
This week, Wal-Mart Watch urged consumers to communicate with the Federal Deposit Insurance Corporation (FDIC) to oppose Wal-Mart’s bank in Utah. “Your voice today could be all that stops The Bank of Wal-Mart from opening all across the country,” warned Andy Grossman of Wal-Mart Watch. “If Wal-Mart succeeds in Utah, “Bank of Wal-Mart” could soon become one of the largest financial institutions in the country, especially since Wal-Mart’s lobbyists are hard at work trying to roll-back state and federal banking regulations to open the door to huge new profits… A “Bank of Wal-Mart” means an even bigger, more dominant Wal-Mart. Most analysts agree, banking is one of Wal-Mart’s most important strategies for future growth… Wal-Mart is applying to open an industrial charter bank (ILC). ILCs are a throw-back to the days before the great market crash of 1929 when banking regulations were few. Utah is one of a very few states that still charters such entities, allowing them to offer most financial services,
including mortgages, loans and credit cards. At least 20 other states recognize Utah’s ILC charters and could soon allow Wal-Mart banks to spread fast. Already, most Wal-Mart stores offer some financial services, such as check cashing, wire services and ATMs. But to make huge profits from credit cards, mortgages and loans, Wal-Mart needs to get in the banking game for real. Today, your voice can help thwart Wal-Mart’s dangerous growth plans.” Wal-Mart Watch has created a petition to John F. Carter, FDIC Regional Director. You can sign the petition at: http://walmartwatch.com/bankofwalmart. For earlier stories on this subject, search Newsflash by “banks”, and order the book “The Case Against Wal-Mart” (see this website’s home page for details.)