There has been an uneasy quiet for about five years since Walmart retreated from its plans to obtain a federal bank charter in the face of intense opposition from the financial services industry and lawmakers.
Since then, however, Walmart has been busy obtaining bank charters in Canada and Mexico. Walmart offers savings accounts and credit cards through its Banco Walmart de México Adelante franchise in Mexico. Those branches accept deposits and originate auto loans and mortgages.
A couple of years ago, it opened Walmart Canada Bank, which offers credit cards and might be rolling out other financial services in the future.
In the U.S., Walmart has opened MoneyCenters in about half of its 3,000 SuperCenters, which offer wire transfers, check-cashing, and bill pay. It continues to open them at a brisk pace. And if a store isn’t big enough for a MoneyCenter, Walmart is installing automated kiosks, which provide a range of financial services.
Sam’s Club, which is owned by Walmart, announced several years ago that it would offer small-business loans from $5,000 to $25,000 through a partnership with Superior Financial Group.
Walmart has gone on record as saying it’s no longer interested in obtaining a bank charter. But with all the banking expertise Walmart is gaining in other countries, some industry observers say the arrival of the U.S. Bank of Walmart is less a matter of “if” than “when.”
Walmart’s entry into the U.S. retail banking market is “inevitable,” says Robert Manning, a finance professor at the Rochester Institute of Technology and CEO of the Responsible Debt Relief Institute. Manning teamed up with the Filene Research Institute to produce a report on the implications for credit unions of Walmart obtaining a bank charter.
“Walmart will enter with high levels of capitalization, a clean slate of performing loans, and a carefully coordi-nated and well-funded marketing campaign that will appeal to the populist, anti-Wall Street sentiments of work-ing and middle-income households,” Manning says in the American Banker. “If you’re a financial institution and you’re not preparing for Walmart now, it could be too late.”
♦ CU branches in Walmart stores offer high foot traffic, a quick way to enter new markets, and lower start-up costs than stand-alone branches.
“The long-term risk is that maybe—not tomorrow, but eventually—Walmart is going to win this battle and get the bank charter it has wanted for a long time,” says Filene Research Director Ben Rogers.
And just like so many small retailers who disappeared once the super stores opened in towns across the country, Walmart “could then begin the process of replacing every branch in its stores with its own bank branches,” Rogers says.
Walmart’s CU branches
Not everyone, however, sees Walmart as a threat. Some credit unions see Walmart as an opportunity and enjoy a healthy business relationship with the retailer. These credit unions have branches in Walmart stores and—for the most part—have been able to compete effectively in a retail setting.
“Walmart is an environment where people are used to seeing things on sale, getting deals, and moving quickly,” Rogers says. “If your credit union can do all those things, you’re set up well. But most credit unions are used to working in a branch environment where things don’t move as quickly and are not quite as convenient.”
For credit unions willing to adopt a retail mindset, Rogers says Walmart stores offer high foot traffic that can boost brand recognition, help with new-member acquisition, and expand wallet share with existing members. Emphasizing products that Walmart currently doesn’t offer, such as savings accounts and consumer loans, is likely to pay off.
“Walmart is a big organization and if it sees a market opportunity it will exploit it,” Rogers says. “But in the near term, there are a lot of advantages to be had by partnering with Walmart.”
Credit unions with Walmart branches praise their relatively low start-up costs, the opportunity to reach thousands of current and prospective members every day, and the cooperation of Walmart store managers and employees. But not all Walmart branches are equally successful, they admit, with return on investment varying by location and local demographics.
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