Walmart Banking, Should the Big 2 in CLT be worried?

[monsoon]

Walmart has applied to the federal regulators to allow it to open an industrial bank. This bank would not provide for retail banking but it would become Walmart's bank which would allow it to avoid the fees it pays to banks today to handle the huge amount of money that flows through the company each day.

However the next logical step once this is step is complete is for it to start offering retail accounts through its new bank. Given it's volume it could easily undercut the more expensive traditional banks with lower cost accounts, offer more convenience and better banking hours, and of course tie in it's banking with its retail. i.e. offer a rebate or something for buying walmart merchandise. I could see mass migrations from the commercial banks. Not surprising a lot of people have become unglued about Walmart's plans and there is heavy lobbying in Washington to deny them the bank.

So the questions would a Walmart Bank hurt the Banks based in CLT? Should Walmart be allowed to do this?

[tombarnes]

I just find the whole idea very disturbing. What's next? WalMart Airways? WalMart medical centers and heath insurance? Where does it end? The retail banking industry isn't one of my favorites. but I can understand their nervousness. At what point does a corporation become too big? I'll start calling them the OctoMart.

[charlotte_bon_vivant]

Wal-Mart claims they're really opening a bank for their company banking needs. I don't buy it. I believe it will ultimately be another of their predatory business practices. If the can get their suppliers to use their banks, they'll have serious control over them. Drastically reduced rates in exchange for exclusive rights to merchandise? I can see that happening...

[A2]

I still think that due to the strict Banking Laws this is dead in the water. It is just not as easy as one would think. However, from what I have read and heard Wal-mart's approach would be simple deposit and loan banking, not the thing that competes with larger more diversified institutions like WB and BAC. These banks have lines of Business that run from Investment banking all the way down to Insurance.

The General Bank of Wal Mart would be just that a general bank for small loans, checking accounts, and possibly savings. While it would have an impact, if approved, it would not put pressure on the Big 10 in the Industry.

It could destroy the smaller banks, which depend on the small customer. But heck so could WB and BAC too.

A2

[SouthJersey7]

I just find the whole idea very disturbing. What's next? WalMart Airways? WalMart medical centers and heath insurance? Where does it end? The retail banking industry isn't one of my favorites. but I can understand their nervousness. At what point does a corporation become too big? I'll start calling them the OctoMart.

I think they can only go so far before they are hit with antitrust legislation. I don't know enough about this law to say for sure though.

[charlotte_bon_vivant]

I think they can only go so far before they are hit with antitrust legislation. I don't know enough about this law to say for sure though.

Yes, but they also have a great deal of power w/r/t shaping public policy at the federal level. That is what frightens me most about Wal-Mart and corporations in general.

[StevenRocks]

Does anyone know if the Woodforest National Banks openeing in Wal-Mart Supercenters have any connection to Wal-Mart? I've never seen a Woodforest branch anywhere else.

[RiverwoodCLT]

It is a bank out of Texas.

Here is a short bio of bank.

Woodforest National Bank Celebrates 25th Anniversary

The Woodlands, TX (August 2005) Woodforest National Bank can truly attest to the old saying “time sure flies when you’re having fun” as they gear up to celebrate 25 years of banking service. Woodforest opened the doors of its first branch on September 5, 1980 in Houston and is still enjoying their banking succeess as they serve more than 250,000 customers at 180 branches throughout the states of Texas and North Carolina.

One of the largest employee-owned community banks in the Houston, TX area.

Already Woodforest leads the nation in Wal-Mart branches, with 138.

[krazeeboi]

This is insane, but I'm not surprised. If this happens, I'm pretty sure it's only a matter of time until it starts acquiring smaller banks. Wal-Mart is on a quest to take over the world.

[suburban george3]

Does anyone know if the Woodforest National Banks openeing in Wal-Mart Supercenters have any connection to Wal-Mart? I've never seen a Woodforest branch anywhere else.

I do know that for the retailers I work with, if a Woodforest branch is in the local Wal-Mart that is now the source of most of their returned checks. Not knocking the bank or their customer, just making a provable observation! Also, where most banks will provide some kind of information to a retailer about their accounts (at minimum the account is active) Woodforest will not.

[Vitamin_N]

A banking site I'm fond of recently posted a piece on this issue that's worth a read. Here's the case for why the big 2 (and banks in general) shouldn't be so worried about Wal-Mart:

http://www.bankstocks.com/article.asp?type=1&id=9880916

Brief excerpt: "Wal-Mart a budding banking powerhouse? Please. The company has no particular advantages in the business (other than generating foot traffic, which does not magically create bank customers), and has a lot going against it. My prediction: if Wal-Mart ever does try to get into banking in a big way, it

[mallguy]

I can see Wal-Mart doing well in things that appeal to low-income customers, such as wire fees for money transfers and check cashing fees. But given the demographic that is likely to use a Wal-Mart bank, there isn't going to be much high fee-generating business from Wal-Mart banks, such as mortgages, car loans, investment accounts, etc.

[swh1972]

I'd be really skeptical if Wal-Mart could pull this off by themselves. Banking is so highly regulated, penetrating the industry from scratch on such a large scale is bound to have problems. The Anti-Money Laundering rules alone would give them headaches. I think the OCC would have a field day with them. On the other hand, if they were able to acquire an existing bank with established controls, I could see it happening.

[A2]

The real problem with the Wal-Mart situation is that it leaves the doors open for others to give it a try. If Wal-Mart were actually succesful at stating their own bank, then what is to stop Exonn Mobile. I mean they are the most profitable company in the world. It would lead to a regulators nightmare. I think that while the concept that Wal-Mart throws out is ok on paper, it will never work because of the dynamics of how Banks are incepted and run. There is a serious conflit of interest when a Retail business decides to play Mr Banker.

It just does not work that way. If the laws ever break down to where it does work that way please let me know because I am calling on Eourpe to bail me out of the serious disaster that could take place within the US financial system.

Offshore Swiss accounts will be all the rage.

A2

[monsoon]

Target has already been given an OK to open an industrial bank. Because of the way they are chartered by the states, some of the federal laws of banking don't apply to them.

[A2]

Target has already been given an OK to open an industrial bank. Because of the way they are chartered by the states, some of the federal laws of banking don't apply to them.

All I can say is that I think I know why Gold is going through the roof now. j/k (although Gold and Silver are at 20 year highs, not a great sign for economic prosperity looking forward) I think it is going to be disaterous if one of these Target, Bob Johnson, Wally World banks collapses. It will mean you and I , Mr and Mrs Taxpayer, get to bail out all of the litttle guys who bank with them. Gee isn't FDIC is a Beautiful thing.

Think about if Target missed on their quarterly earnings, but heck what do they care they can get a low interest loan from one of their subsiderary banks that they run and operate, fluff the balace sheet and bada boom bada bing:

No more Balance Sheet Problem.

Kind of reminds me of Worldcom and Enron with their tactics of phony accounts and moving money around in a shell game of fancy accounting.

At one time Worldcom & Enron were larger in Market-cap than the Wal-Mart of today, but they sure did come down like a house of cards. I think it is sad that we let corporations just get their greedy little hands into every little jar. I think there has to be enforcement of laws in order for this not to happen. Not becasue it might take market share away from our Big Banks, but in the end, because it might really screw us (the tax-payer)

On a side note Walmart is not that well liked by Wall Street right now. take a look at just the last 12 months. Their stock chart says it all. Be sure to notice the Money Flow at the bottom of the Chart. Money has been leaving Wal-Mart stock so fast it is scary. Billions to be precice.

http://bigcharts.marketwatch.com/intchart/...wmt&time=&freq=

A2

[monsoon]

Its the price of oil. Gold goes up and money leaves the stock market when oil prices rise. People remember the 70's when high oil prices and no oil caused the stock market to die off.

Personally I recommend that everyone keep most of their money in a credit union. It's much cheaper, you get a better return on the money, and usually better service. Walmart and Target are an interesting proposition however. If they offer better terms, I don't have any problem with putting money in one of their banks if it means better returns and rates.