Wal-Mart Promises Limits on its Industrial Bank

by Mike Bevel, CollectionIndustry.com

?No, seriously you guys,? says Wal-Mart: ?our bank is totally not going to become a mega-threat to the banking industry the way our stores have become a threat to small town economies.?

Two months into the six month moratorium on industrial bank applications put in place by the Fed to ward off Wal-Mart and Home Depot (among others), Wal-Mart is trying to woo back support for its banking application, promising that it?s not trying to wipe out local community banks or take over the industry. ?This time, things?ll be different,? Wal-Mart pleads.

Wal-Mart is in the market for an industrial bank ostensibly to process credit card payments. Currently, Wal-Mart is spending a considerable amount of money (Wal-Mart sees about $2.4 billion transactions a year) sending their credit card payments for processing to other banks. Wal-Mart sees its industrial bank ? to be chartered in Utah ? as a way to streamline the credit card payment process and increase its efficiency.

Critics are dubious of Wal-Mart?s claim. The Independent Community Bankers of America states on its Web site that “Wal-Mart Bank would pose a serious threat to drive community banks out of business, like they have done to local grocery stores, drug stores, hardware stores, etc.

?Wal-Mart says its ILC will have only ‘back office’ functions,” the ICBA states, “but there is no way to guarantee that the Wal-Mart Bank will stick to that plan.”

Wal-Mart’s director of financial services, Tom McLean, has been busy trying to disavow industry critics of their concerns. “There will be no lending,” he told the Utah Desert News. “There will be no branching.”

Those who oppose Wal-Mart?s application can be forgiven some hesitation before believing the largest retailer in the world. Wal-Mart continues to assert that it is good for small and local economies, even though some evidence would seem to suggest otherwise.

Wal-Mart has four months still on its public relations campaign, before the moratorium is lifted, and it can see what effect, if any, its assertions have had on the public and the Fed.