While Wal-Mart press isn't always positive, they have been credited by some with keeping inflation rates low with their relentless push for lower prices. Now, they may save you money on more than laundry detergent and prescriptions. Soon, you may be banking at Wal-Mart.
Seem unlikely? It's not as far off as you may believe.
In fact, relatives of the founder of Wal-Mart, Sam Walton, also control Arvest Bank. Though this is no indication of the retail giant fully entering the finance industry, it only shows they're closer to the banking business than many people know.
Wal-Mart has been quietly creeping closer to bank status for years and as traditional banks and credit unions drop rates, increase fees or go out of business, the biggest retailer in the U.S. seeks to fill the void they leave behind.
Strong Opposition
Wal-Mart has tried to buy banks in the past twice, in fact but were met with extreme disapproval and lawmakers never let it happen. However, other companies like Target and Nordstrom have purchased banks without so much as a second glance. According to MSN Money, it's because they don't have the same "economic muscle."
This hasn't slowed Wal-Mart's relentless attempts to become more bank-like, though. CNN Money reports "the latest evidence that Wal-Mart plans to continue its push into financial services was the news last week that it had taken an equity stake in Green Dot, which manages the retailer's prepaid debit cards and is currently seeking regulatory approval to acquire a small Utah-based bank for $15.7 million."
Wal-Mart Financial Services
Wal-Mart actually offers consumers a wide variety of financial services and products already, often at half the cost of other financial institutions, which makes their possible transition to full-on bank seem like more of a possibility. Generally, non-bank financial services vendors profit from transactions by charging huge amounts. Instead, Wal-Mart is making these services affordable to lower income consumers who are otherwise unbanked or underbanked.
Here's a look at what they currently offer:
- Prepaid Debit Card: Visa prepaid debit cards are available through Wal-Mart to consumers with out bank accounts who would otherwise be unable to compete in an increasingly plastic-based shopping environment.
- Wal-Mart Credit Card: In January, Wal-Mart introduced their new Wal-Mart Discover credit card. Cardholders can earn up to 1 percent back on purchases and save 3 cents per gallon at participating gas stations.
- Check Cashing: Customers can cash payroll checks for a $3 fee.
- Money Orders and Wire Transfers: Wal-Mart has developed relationships with financial institutions like MoneyGram International and SunTrust Banks. According to Bloomberg Businessweek, you can transfer money to Mexico for $9.46 and buy a money order for 46 cents when some competitors charge twice as much.
Further, Wal-Mart plans to open over 400 more "Money Centers" in stores across the nation this year. These offer shoppers a convenient place to obtain many of the above services, much like a mini-bank within Wal-Mart Stores.
Sam's Club Small Business Loans
Sam's Club, a division of Wal-Mart, is planning to work with a finance company in order to offer small business loans. NPR's Planet Money reports that small businesses contribute to about half of the money Sam's Club makes and will be returning the favor by providing loans through Superior Financial Group.
While this federally regulated lender will actually fund the loans, Sam's Club will promote them and offer a discount on the application fee and interest rate.
What Does This Mean for Consumers?
Those who are either unsatisfied or aren't able to obtain adequate or affordable services from banks can turn to Wal-Mart instead. Many of the services offered are specifically aimed toward consumers who are low income or simply do not use banks.
Additionally, Sam's Club small business loans are targeted toward minority, women and veteran-owned businesses.
"The government-guaranteed loans are geared for those who need a modest amount of start-up money and for established businesses that need cash quick," said Tim Jochner, chief executive officer of the Superior Financial Group. In essence, Wal-Mart seeks to fill a niche market that isn't really covered by community banks, rather than compete with the banks.
This means that while the prospect of Wal-Mart the Bank becoming a reality makes the banking industry shudder, consumers will likely benefit from it. Should Wal-Mart become a true financial institution at some point, it may prompt banks to change the way they operate and offer lower fees and interest rates that can compete with Wal-Mart's affordability. Until then, there is already a plethora of products and services offered by Wal-Mart and Sam's Club that consumers can take advantage of now.
