Wal-Mart Stores Inc. is the world’s largest retailer. With its solid business policy to serve all – including the low-income consumers – Wal-Mart has become a giant in retailing not only in the United States, but also in Mexico and Canada (Ross; Shaw and Tait). The company has also entered India, a hub of low-income consumers (Mahapatra). Wal-Mart sells goods at unbeatable prices. It thus “strikes fear into the establishment of every new industry it considers entering” (Shaw et al. ). Presently, Wal-Mart is expressing its desire to enter the banking industry in the United States.
However, the banking industry is thoroughly intimidated by the kind of competition it would have to deal with. Wal-Mart is certain to be of financial service to the low-income consumer – if it does enter the banking industry in the United States, full-fledged. At least one-fifth of Wal-Mart consumers are low-income families that cannot afford to pay the high prices charged by most consumer banks and financial organizations in the United States (Weston). Hence, many low-income families do not have bank accounts in the country.
Wal-Mart would like to change that, by offering unbeatable prices in banking as well (Zellner). Mexico has more low-income consumers than the United States. Wal-Mart Stores Inc. is allowed to enter the banking industry in Mexico, with all due respect. Most of the major banks in Mexico are multinational. The competition that Wal-Mart is expected to bring to the banking industry in Mexico is welcome, given that countless Mexicans also cannot afford the prices charged by the foreign banks in the country (“IMF Says Wal-Mart Bank Boon To Mexican Market”).
WAL-MART BANKING Page # 2 The United States is wary of Wal-Mart’s entry into the banking industry, nevertheless. Considering the affairs between the United States government and Microsoft in recent years, it can be assumed that the country would not like Wal-Mart to become a kind of a monopoly with its “lowest prices” in banking. The banking business is, after all, a solid money making enterprise.
Yet, the United States does not totally reject the idea of retailers turning into bankers. Both Nordstrom and Target have purchased banks. Even so, these retailers do not offer unbeatable prices to all income groups. It is only Wal-Mart that is creating a storm by expressing its desire to become a full-fledged financial organization (Weston). Seeing that the financial service expected to be rendered by Wal-Mart in the area of banking would be highly beneficial to all income groups – the deal should be allowed to go through.
After all, even high-income banking consumers would benefit by the competition that Wal-Mart brings into the banking industry. If Wal-Mart Stores Inc. manages to transcend the loopholes that are presently being created to obstruct its entry into the banking business – it would turn out to be an industrial charter bank. These banks are owned by non-financial companies and monitored by the FDIC. One problem that experts envision with regards to Wal-Mart’s desire to be a banker, is that the FDIC would be required to help in bailing out the retailer through its bank, whenever the retailer happens to be in financial trouble.
Similarly, when and if Wal-Mart’s banking business is in trouble, the retailing business of Wal-Mart would be expected to bail it out. Therefore, exclaims Wal-Mart Watch, “The more worrisome thing is that ILCs blur the lines between a corporation and a bank and thus the lines between what would be corporate activity and what would be banking activity. The real WAL-MART BANKING Page # 3
issue here is about the blending of banking and commerce. ” The website goes on to explain that Wal-Mart banking would put other commercial banks out of business, and become a kind of a monopoly in banking. Indeed, this appears as the real reason why the United States is unwelcoming toward the idea of Wal-Mart becoming a full-fledged banker. WAL-MART BANKING Page # 4
1. “Bank of Wal-Mart: What Does It All Mean. ” Wal-Mart Watch (2005). Retrieved from www. walmartwatch. com. . (9 February 2007). 2. “IMF Says Wal-Mart Bank Boon To Mexican Market: Bank says it will cater to underserved, low-income market in Mexico. ” Retrieved from http://money. cnn. com/2006/11/27/news/international/bc. walmart. mexico. reut/index. htm? postversion=2006112713. (9 February 2007). 3. Mahapatra, Rajesh. “India’s Reliance Industries sees new retail business bringing in US$22 billion in 4-5 years.
” The America’s Intelligence Wire, 29 January 2007. 4. Ross, John. “Quezalcoatl Must be Furious”: Wal-Mart Invades Mexico. ” Counter Punch (17 May 2005). Retrieved from http://www. counterpunch. org/. (9 February 2007). 5. Shaw, Hollie, and Carrie Tait. “Wal-Mart eyes banking: Financial services in Canada: It’s a way to strengthen ties with its customers: analyst. ” CanWest Interactive (31 October 2006). Retrieved from http://www. canwestglobal. com/. (9 February 2007).