Quote :

"Bankers fret as Wal-Mart seeks check-cashing OK Craig M. Douglas, Journal Staff In a move that could have far-reaching consequences for local community banks, retail giant Wal-Mart Stores Inc. last week applied to state banking regulators to open check-cashing operations at its 44 Massachusetts stores. Banking experts say the move, if approved, will likely have negative repercussions for a community-banking sector already under siege by tax-exempt credit unions, which have been increasingly offering traditional banking services. The concern now is that Wal-Mart (NYSE: WMT), the nation's largest retailer, will use its yet-to-be-approved check-cashing outfits as a foothold to eventually offer consumer and possibly commercial banking services, further cutting into the already diminished market share of the state's local savings and thrifts. Filed Oct. 31 with the Massachusetts Division of Banks, Wal-Mart's application seeks to open the in-store check-cashing windows to handle payments made for payroll, government, money-order and insurance purposes. The company is not seeking permission to cash personal checks, according to people familiar with the application. Joseph Leonard, the banking division's general counsel, said Wal-Mart's filing outlines a plan to charge customers 1 percent of each check's value. Those charges will be capped at $3, regardless of the check's dollar amount. "The application is limited to check cashing. That's all they're seeking from us at the moment," said Leonard, adding that Wal-Mart's main application has 43 supplements outlining the operating hours and other specifics for each of its Massachusetts stores. A state banking group is already registering opposition. "We think it is a bad turn of events," said Bruce Spitzer, communications director at the Massachusetts Bankers Association. "Do bank customers really want to see the Wal-Martization of the banking industry? We don't think so." "

You didn't hear much from the banking industry while Walmart destroyed thousands of small Mom & Pop businesses. But now, when the bullseye is on their foreheads, it's a big problem.

Why wouldn't consumers want to see the "Walmartization" of the banking industry. They've welcomed it with many other products and services.

The banking industry does has a powerful lobbying influence in Washington, so this battle will be very interesting. The strategy used will be very revealing. Perhaps the bankers will force the gov't to prohibit FDIC protection with any Walmart bank. Perhaps since Walmart isn't a "Real" bank, they will be required to hold higher reserves than regular banks. Walmart may have to issue their own currency. I wonder how the dollar would hold up against it.

http://www.bizjournals.com/industries/retailing_restaurants/retailing/2005/11/07/boston_story2.html?f=et182&hbx=e_vert

[Edited on November 7, 2005 at 10:54 AM. Reason : .]

11/7/2005 10:53:31 AM

FDIC?

11/7/2005 11:01:28 AM

^ Basically, the insurance that guarantees your savings in the event that the bank collapses and disappears. Good for up to $100,000 per account.

11/7/2005 11:04:59 AM

I think its pretty silly to think that Walmart would want to go above and beyond simply offering check cashing at their stores, considering it would be a massive undertaking that would be a major deviation from their core business.

[Edited on November 7, 2005 at 11:19 AM. Reason : ]

11/7/2005 11:09:16 AM

Even Free-er Checking!

11/7/2005 11:55:54 AM

Don't many stores do this already? What's the big deal

11/7/2005 12:32:35 PM

Quote :

"Don't many stores do this already? What's the big deal"

exactly, this is non-news.

11/7/2005 12:35:15 PM

Quote :

"You didn't hear much from the banking industry while Walmart destroyed thousands of small Mom & Pop businesses. "

i dont get why you think we should have heard from the banking industry cause of that

11/7/2005 12:37:42 PM

Quote :

"I think its pretty silly to think that Walmart would want to go above and beyond simply offering check cashing at their stores, considering it would be a massive undertaking that would be a major deviation from their core business."

If Wal-Mart was really going into the banking industry, they'd more likely work a deal with some national bank to put branches in each one of its stores or just buy a bank outright and setup shop.

11/7/2005 4:05:01 PM

redguard

i know what FDIC is

11/7/2005 4:18:23 PM

Quote :

"FDIC?"

Sorry, just the way you phrased the question.

11/7/2005 5:25:11 PM

I say go for it... local banks around here are doing fairly well... by fairly well I mean 3 55" windscreens in every branch

11/7/2005 5:32:11 PM

yeah thats an awesome way to judge them

11/7/2005 5:52:16 PM

A little unconventional competition can be a good thing.

11/7/2005 7:30:04 PM

^^^yeah
i just read the article rather than read earthdogggg's comments

and my initial thought was "what does the FDIC think?"

which came out as FDIC?

11/7/2005 10:38:44 PM

Quote :

"i dont get why you think we should have heard from the banking industry cause of that"

It's just interesting how each industry that Walmart invades feels that they are too special and important for Walmart to replace them.

Quote :

"Don't many stores do this already? What's the big deal"

I think Walmart's goal is to own their own bank, not just host some other bank's branch. Imagine the money they could save by depositing their money into their own bank.

Quote :

""what does the FDIC think?""

Walmart has already gotten the ball rolling. In August, an application for Federal deposit insurance for a Utah industrial bank has been filed with the FDIC on behalf of Wal-Mart Bank, a proposed state nonmember bank.

Here's a typical opposition letter from the president of the Peopl'es Bank & Trust. Note the similarity in his argument against allowing a Wal-Bank with the argument of every other industry Walmart has gone after.

Quote :

"Mr. John F. Carter Regional Director Federal Deposit Insurance Corporation 25 Jessie Street at Ecker Square, Suite 2300 San Francisco; CA 95105 Re: Comments Regarding FDIC Application #20051977; Wal-Mart Application for Insurance and Industrial Bank Charter Dear Mr. Carter: I am writing to oppose the application ofWal-Mart Stores, Inc., for Federal deposit insurance coverage for an ILC charter in Utah. I am a community banker and believe strongly that allowing Wal-Mart to own a bank charter and potentially open branches in its network of stores would do irreparable harm to my community and my institution, and pose a severe systemic risk to our nation's economy. I am aware that Wal-Mart has stated that it intends to operate a limited ILC charter in Utah. I am skeptical. Their assurances that the operation will remain narrow ring hollow in the context of the company's history and corporate philosophy. This is Wal-Mart's fourth attempt to get into the banking business. Wal-Mart's CEO says he wants to grow the company and provide financial services to its customers. It is not much of a stretch to conclude that somewhere down the road, Wal-Mart will be amending its business plan to allow it to offer a full array of banking services. This must not be allowed to happen. Wal-Mart has a long history of destabilizing communities by undercutting prices of local merchants and driving them out of business. That is not a theory, it is a fact. For example, when Wal-Mart entered Iowa, 50% of clothing stores, 30% of hardware stores, 42% of variety stores, 26% of department stores, and 25% of building materials stores were driven out of business. Were Iowa consumers well served by eliminating Wal- Mart's competitors and denying consumer choice? I think not. Think of the economic consequences of those statistics, and the impact it had on the state of Iowa! Communities recover from natural disasters; man-made ones are much longer lasting. Wal-Mart did not open stores in those communities to be civic partners with local merchants; they opened stores to drive local merchants out of business and steal their customers, which is just what they did. The largest company in the world could do the same thing to community banks. The FDIC would be ill-advised to set this nation on a course that could result in the demise of the community banking industry as we know it today. Congress has reaffirmed our nation's long standing policy against the mixing of banking and commerce, and with good reason. Mixing banking and commerce would create serious conflicts of interest and distort credit decisions. The impartial allocation of credit is the linchpin of our financial system and must be preserved. Would a Wal-Mart Bank offer credit at reasonable terms to its competitors? Would Wal-Mart require its suppliers to bank at the Wal-Mart bank? Even more importantly, the largest company in the world owning a bank would produce a dangerous concentration of economic power and resources that would pose severe systemic risks to our economy. Think what would have happened if Enron owned a bank? Or Worldcom? It could have exposed the FDIC fund to enormous liability and pulled down our entire financial system. Our nation cannot afford to take that risk to save Wal-Mart a couple of pennies on each credit and debit card transaction. For the sake of the community banks of our nation and the customers and communities we serve, please do not allow Wal-Mart to get into the banking business. Make a statement for fair competition and consumer choice by denying Wal-Mart's application for deposit insurance. Sincerely,"

11/7/2005 11:38:17 PM

I think its about time to break up walmart and make it compete against itself.

11/7/2005 11:55:21 PM

Quote :

"Mixing banking and commerce would create serious conflicts of interest and distort credit decisions...It could have exposed the FDIC fund to enormous liability"

This is the only part of the letter that had any merit. Is it a defensible reason to stop them? I don't think so, but it does deserve consideration.

11/8/2005 9:02:32 AM

Quote :

"Why wouldn't consumers want to see the "Walmartization" of the banking industry."

hmmmm. ever heard of a monopoly? i mean, they suck bad enough when they exist just across one sector (Microsoft), imagine how bad it would be when combined across several sectors.

I'm not trying to advance the slippery slope argument, but we must look at how wally-world has swallowed up smaller businesses. Thinking that wally-world would kill a huge national bank is ludicrous, but it might be enough to kill the smaller banks that exist in the US and stifle development of new banks.

Quite frankly, Walmart is big enough. we don't need to let it expand into other sections of the market using its already monopoly-like status.

Plus, blurring the line between creditor(beyond a simple credit card) and retailer is not a good thing, as someone else already pointed out...

11/8/2005 9:42:49 AM

someone point me to a mom and pop bank

11/8/2005 10:14:34 AM

Quote :

"National Bank of Wal-Mart? Wal-Mart already offers money-transfer and check-cashing services. The next step is full-on banking. The financial services industry is terrified, but consumers might benefit. By Liz Pulliam Weston, MSN Money Wal-Mart has a reputation for squeezing out Mom-and-Pop stores and other low-margin businesses, like unionized grocers. But imagine for a moment if the world's biggest retailer put the pricing squeeze on one of the world's more profitable businesses: financial services. Who would pay the price? Perhaps: Mortgage lenders who surprise their borrowers with last-minute junk fees. Banks that nickel and dime their small account holders to death. Auto lenders who add discriminatory surcharges on loans to black and Hispanic buyers. Credit card companies that use every excuse to jack up rates. Check cashers and payday lenders that levy usurious charges on their customers. Wal-Mart's relentless push for ever-lower prices has revolutionized retailing and is sometimes even credited for helping to keep U.S. inflation low. It's not hard to make the leap into imagining the retailer bringing similar price discipline to an industry grown fat on escalating rates and fees. (Fee income now comprises half of banks' total income, according to investment banker R.K. Hammer.) Organized opposition You can say I'm a dreamer, but I'm not the only one. Many banking experts predict that Wal-Mart will eventually break into the business -- despite determined opposition from the U.S. banking industry. (Relatives of Sam Walton, who founded Wal-Mart, control a regional bank called Arvest Bank. But in regulators' minds, and in practical reality, that's a far cry from publicly-traded Wal-Mart entering the banking business.) Wal-Mart may have just taken a step toward that end by applying to create what's known as an "industrial loan corporation" in Utah. The ILC would handle Wal-Mart's credit card, debit card and electronic transactions, saving the processing fees the company now pays to a third party. ILCs typically can't offer checking accounts, but they can take deposits and make loans. Wal-Mart's previous attempts to create a bank have been cut off at the pass, including once in 1999 when it tried to buy an Oklahoma bank and more recently in its attempts to buy a California industrial loan corporation. "The banking community's opinion was that the world as we knew it would come to an end" if Wal-Mart were allowed to buy the savings bank, said banking analyst Bert Ely, who well remembers the 1999 tempest. "There was strong, strong, strong opposition." Other retailers, including Nordstrom and Target, have purchased banks without creating nearly the fuss that Wal-Mart's involvement generates. But those chains don't have nearly the scope or the economic muscle that Wal-Mart flexes. A different customer base They also don't cater to quite the same population. Wal-Mart customer's average incomes are below the national average, while Target's are above -- and Nordstrom's, well above. Some analysts estimate that more than one-fifth of Wal-Mart's customers have no bank accounts, which would be about twice the national rate, according to the Federal Reserve. "Wal-Mart National Bank" could bring these customers into the banking fold, offering them affordable bank accounts, credit cards and mortgage loans. "It could turn out to be a good thing for consumers," said consumer advocate Linda Sherry, editorial director for Consumer Action, "especially the unbanked or those who are suspicious of banks." It's a pretty big market and one that Wal-Mart has already started to tap. The retailer began offering money orders three years ago and has since added payroll check-cashing and money-transfer services. Today, the company's 3,066 stores and supercenters process about a million financial transactions a week. The prices are predictably cheap: A wire transfer to Mexico costs less than $10, compared to $14.99 at Western Union. Money orders are less than 50 cents, compared to a buck or more at many banks. Checks are cashed for $3, and customers aren't unknowingly steered into short-term loans at 300% to 1,300% interest rates, as happens at some unethical check-cashing outlets. Wal-Mart doesn't have the check-cashers shaking in their boots -- at least not yet. For one thing, the check-cashers have Wal-Mart outnumbered, with more than 11,000 outlets cashing $55 billion in checks annually, according to the Financial Service Centers of America, a trade group representing the industry. Likewise, Western Union has far more offices abroad -- 196,000 agents in 190 countries -- than MoneyGram International, the money-transfer service Wal-Mart chose as its partner and which trails with 75,000 agents in 170 countries. MoneyGram has about 10% of the estimated $65 billion that flows out of the U.S. in money orders, estimates Aite Group of Boston, while Western Union has 22%. How many branches? Wal-Mart's record on installing branches of partner banks in its stores also seems somewhat tentative, Ely said, with only one-third of the stores offering full-service banking. Banks have recently rediscovered the fact that customers like to have convenient branches, and Ely wonders if many would be willing to drive to their local Wal-Mart even if every store had a branch. "I'm not convinced (Wal-Mart) would have sufficient branch density," he said, "that it would be attractive enough for customers to do their banking there." But Ely acknowledges that Wal-Mart could solve the problem with numerous, well-placed ATMs in surrounding communities. The retailer also could be using its relatively low-key partnerships with financial services companies to study the business before making its own, branded push into banking. "Just look at its Web site if you want to see its intentions," Ely said, quoting from exactly that source: "'A trusted name in financial services.'" Of course, Wal-Mart National Bank wouldn't stop at providing checking accounts for the poor. The retailer already has introduced a no-fee, 1% cash-back Discover Card for its better-heeled clientele, and if the company did accept deposits, it would need to invest the money somewhere -- perhaps in mortgages and auto loans. That, again, could benefit consumers. I won't say that Wal-Mart is assuredly more ethical than mortgage lenders who thrive on junk fees or auto lenders who charge minorities hundreds of dollars more for loans than whites with similar credit scores. The retailer's vehement anti-union stance and its policies regarding pay and benefits should give anyone pause. But its singular focus on delivering "always low prices" to its customers could provide a much-needed shock to financial-service companies who have feasted on customers' pocketbooks for far too long. "

11/8/2005 11:35:17 AM

Quote :

"we don't need to let it expand into other sections of the market"

It is not up to "us" to let it do anything, the customers of walmart can do whatever they want with their money.

11/8/2005 11:35:45 AM

Quote :

"someone point me to a mom and pop bank"

http://www.pulaskibankstl.com/
https://secure.umassfive.org/

Two off the top of my head. Large financial institutions like Wachovia, CitiGroup, and Bank of America will survive. It's the smaller, regional and local institutions that would probably be crushed.

11/8/2005 1:11:40 PM

Quote :

"the customers of walmart can do whatever they want with their money."

yes, until walmart drives all of the other competition away. then walmart does what it wants to with their money.

11/8/2005 5:49:01 PM

^^cool but i meant around here

11/8/2005 5:56:31 PM

^^ I find it difficult to believe that Wal-Mart could ever be more than a bit-player in the banking industry, just another Wachovia or Bank of America.

11/8/2005 6:09:21 PM