Let Wal-Mart be a Bank
by Tom aka Rusty Rustbelt
Consumer Finance: Let Wal-Mart be a Bank
One of the side effects of the “great recession” is damage to credit records and banking relationships for many people who get in financial trouble. Many of them will have trouble reestablishing banking relationship (that the banks caused the recession is irrelevant, of course) because the bank computers have them on a reject list, even for a savings account.
Several years ago Wal-Mart starting actively talking about becoming a bank, and the banking industry and their lobbyists went all postal insane on Congress (some Wal-Marts have a Wood Forest bank branch).
Truth is, for many people, the customer service counter at WM is already their de facto bank. They use it to pay bills, transfer money, cash checks, and use prepaid debit cards and gift cards for many purposes.
So, since Wal-Mart is already a de facto bank for millions, why not let it be a bank? The other banks do not want the business anyway.
(PS: some academic research I did a few years ago leads me to believe WM plays a major role in transferring money from undocumented workers to Mexico, although WM denied in writing the possibility of such transfers, while running a discount special on transfers to Mexico!)
Walmart should be allowed to be a bank – it would siphon money away from wall street, create some competition, and send a message to the Pukes who are talking about punishing Walmart for their support of hcr.
Walmart has been expanding ‘money centers’ in most of its locations to handle such bill paying and banking transactions. At $3 check cashing is a bargain compared to the check cashing and liquor store alternatives. Moneygram transactions there are among the least costly
Walmart is my bank. All I need one for is to get cash back on my internet bank debit card.
Certainly cheaper than bailing out existing banks….
Why don’t they get rid of the frauds and middlemen and do FedRes Direct, an on line service where the fed will buy a piece of paper from me and give me cash?
Just like they do for all those guys on Wall St.
It could run like “fed direct” in reverse………………………………
I’m not at all sure that the answer to TBTF and the banking regulatory problems is to make WalMart the “Company Store”. That concept didn’t work in the past.
A couple of responses edge up to the question of the financial structure of a “Wal-Bank”. Presumably, Wal-Bank would not have direct access to the resources of Wal-Mart. Wal-Mart might inject funds when it served Wal-Mart’s purposes, but otherwise, no. Would Wal-Bank get FDIC coverage for deposits? I’d guess yes. So while this may be a good idea from a consumer point of view, I’m not sure we gain much toward banking sector stability. Does one more conduit for cash being plugged into the financial economy help stabilize the system? Wouldn’t think so, but I’m all ears if anybody has a well-thought-out argument.
Instead of being organized as a bank, WM’s financial services could be set up like a federally insured credit union. It could do car loans, etc. It could get into microlending, even, since many unbanked customers do not have any credit or poor credit. If WM gave favorable consumer interest rates and sold stuff online (!), the rest of American retail would have to rethink their business models. And so would the commercial and investment banks. Heh. Heh. Heh. After all, competition would be good for GS, BOA, Citi and that bunch. It’s the magic of the free market, right? NancyO
This would do nothing for banking sector stability. the best thing we could do there is to break up Citigroup and then B of A, and maybe Chase, and then…..
It would provide a level of service for those currently frozen out of the banking market.
load 16 tons, and whaddaya get…..
WM is already providing dry goods, groceries, Rx, mini-clinic and optical, auto and tire, and etc., as well as running a consumer financial customer service desk for the not-so-well off.
Years ago in New Orleans, the locally owned discount grocery chain–“Schwegmann’s, the poor man’s friend”–started their in house bank, Schwegmann’s Bank.
This was in the pre-ATM days, so many a Friday afternoon was spent in line at Schwegmann’s customer service desk cashing a personal check for the weekend’s cash. The banking idea followed naturally from that.
One of the biggest scams in American banking is the payday lending industry. Such lenders are allowed to collect interest rates in the 100% of percentage points. Working poor peeople have exactly the same flat tires, dead batteries and sick kids who need prescriptions as everyone else. But, no money in reserve. So payday lenders leap in and make incredible profits lending money to people who can’t pay back the loan before the next little emergency. Do this enough and you can end up paying out 30% or more of your annual income to your neighborhood payday lender.
WM could run this business better, cheaper, and actually perform a public service while doing so. In the absence of meaningful state and federal regulation of lending businesses generally, WM could force other lenders lending at exhorbitant rates to moderate their practices or go out of business. It would actually be better than the status quo for millions of American consumers. I can’t believe I said that, but it sure looks like it could be a good business. NancyO
closer and closer to one-stop-shopping at ‘Buy N Large’, ala Wall-E.
WM routinely ‘works with’ (like gangsters?) suppliers to lower costs to an acceptable level to WM (google ‘walmart vlassic’). This is one instance that I wouldn’t mind seeing some ‘suppliers’ get their arms bent and I could be pro-walmart… however, I feel that somehow people are going to end up getting screwed by this (maybe just by virtue of making WM bigger and more influential.)
Or let the banks sell groceries might help.
I take back everything I said. All of it. WM is really a vampire squid. Not that I didn’t think so, but in view of its rapacious nature, you’d certainy think that someone would try to beat them to the low-end banking/micro-loan/credit repair/car loans and Much Much More! business. Oh, well. You can’t beat the Biggest Business On Earth. Dammit. NancyO
They are a lot more complex than that. Having lived in a small town and seen what slimeballs ran the local hardware stores and the living they made stealing from lease-to-buy, I was never that sympathetic to the Wal-mart killed my happy main street argument. And they do some smart stuff for energy http://green.harvard.edu/node/293 and they’d compete with pay-day rip off lenders and make retail banking important and drain cash from wall street. What’s not to like?
They are scumballs, but consider the context.
Sure if they cease and desist being anti union.
Well, rootless_e, you sure gots a point there, judge. Your observations about small town business ethics are perfectly accurate. I see that here in my bucolic SWGA paradise and I saw in California ag towns like Fresno, Bakersfield, Santa Maria and Oxnard. Mainly, check cashing, payday lenders and small loan companies. In ag towns, you see a thriving money transfer and counterfeit document trade. You can make money hand-over-fist if you have a laser printer and a few good documents to copy. BIG bucks. And, of course, the local labor contractors don’t always send IRS the taxes they collect.
However, the idea would be to get NGO’s and the UN for example, to create a system to compete with the wonderful people in Citibank and BOA. Microlending would completely revolutionize the little loan business. And, of course, if they got into the credit card business, imagine what would happen if the flat 4% banks charge retailers went down to 2 or 2 1/2%. Talk about encouraging small business. Incidentally, vendors who do business with the federal government to provide credit cards and certain bank drafts get a percentage of everything they sell that’s not paid in full in 30 days (I think. May be more, but NOTHING gets paid in 90 days.) That’s some big bucks, alright. So, WM would be in good company with the big time brokers and financial markets. Jeez, rootless_e, good thinking. NancyO
They should talk turkey with Andy Stern. He has no objection to an option to use 2% of a worker’s FICA contribution to start a private account. He’s also on the Catfood Commission and presently retired from the union business. But, nothing like a company union to make life good for a “small business”. The mafia used to run the unions for various industries like construction, trash collection, maintenance and even the meat processors in some cities in the East and Midwest. He lead the SEIU to unparalleled membership growth during the past 15 years or so. He’s a can-do guy. You know, guys, instead of giving these ideas away for free, we orter be selling them with Power Point presentations and the whole enchilada. I wish! NO
Visions of GMAC, etc. are rolling over my head.
Years ago in blue collar neighborhoods, on Friday afternoon or Saturday morning mom would take dad’s paycheck to the grocery, buy the groceries and get cash for the balance.
This would 1) insure the family would eat and 2) insure dad did not blow the check gambling or at the pub.
When I was a baby accountant I was amazed at the amount of cash flowing through these stores in 24 hours.