June 25, 2007: In the face of overwhelming Industry opposition, Wal-Mart earlier this year withdrew it's application for a bank charter.  Now the retail giant believes it can offer many of the same services without the need for a regulatory oversight. Introducing Wal-Mart MoneyCenters.

The Bentonville, Ark., company announced last week that it's MoneyCenters will offer check cashing, bill payments and international money transfers. Plan call for Wal-Mart to open their financial-services centers in 450 stores by the end of 2007 and in 1,000 stores by the end of 2008.

As part of its services, the company will issue a Wal-Mart MoneyCard, a prepaid Visa card, that will cost $8.95. It can be used like a credit card to shop online and to pay for gasoline and merchandise at other retailers. The card will be available at most Wal-Mart stores by year-end.

Reports say that the check cashing fees Wal-Mart will charge will be 50% below industry averages.

According to BusinessWeek (June 22, 2007), some view the Wal-Mart announcement as a way to avoid regulatory oversight.  "Wal-Mart has said before publicly that they were interested only in processing payments and weren't going to offer financial services," says Republican Rep. Paul Gillmor of Ohio. "It's a matter of credibility when they promise something and do the opposite."

Gillmor, along with Rep. Barney Frank, D-Mass., is co-sponsoring a bill that would prevent nonfinancial commercial institutions from operating a bank. The bill passed the House with 96% of the vote and is pending in the Senate.

For Wal-Mart, financial services offer a promising new avenue of growth. The company has struggled to revive its once-robust sales and profit growth. Its comparable-store sales were down 3.5% in April, the largest monthly decline since 1979. A strategy to move upscale with trendier apparel and fine home goods hasn't panned out.

 

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