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 coordinated and well-funded marketing campaign that will appeal to the populist, anti-Wall Street sentiments of working and middle-income households,” Manning says. “If you’re a financial institution and you’re not preparing for Walmart now, it could be too late.”
“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, acquire new members and expand the share of wallet 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.
To succeed in a Walmart or retail environment, credit unions suggest you adapt operations by:
♦ Cross-training staff to cover the varied demands of walk-ins;
♦ Extending hours on weekdays and weekends based on branch usage patterns;
♦ Making greater use of kiosks, with lower reliance on teller counters and offices;
♦ Adopting a retail mindset, including activities and giveaways that offer opportunities for friendly interaction with shoppers in store aisles;
♦ Building knowledge of store layout and services to offer information to shoppers in the branch or in the aisles;
♦ Forging strong relationships with store managers and staff, including MoneyCenter employees, with presentations at employee meetings and special membership offers; and
♦ Offering short-term promotions that reflect stores’ seasonal sales themes and emphasize strong visuals to appeal to shoppers passing by.