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Does Wal-Mart Need a Banking License?

From the International Times:

Wal-Mart Stores Inc. makes no bones about its efforts to expand into retail nonbank consumer financial services.

Over the years the world’s largest retailer has entered the market for prepaid debit cards, credits cards, payroll check cashing, money orders and wire transfers, but for years it has had its sights on a holy grail: full-fledged retail financial services. Having a bank charter would first allow Wal-Mart to lower its cost of processing credit and debit card transitions, for example. It could also potentially engage in the many services offered by your local bank branch – from auto financing to mortgages.

Through its membership warehouse vendor Sam’s Club it already offers small business loans of up to $25,000. A decade ago the company tried unsuccessfully to acquire banks. Three years ago, Canadian banking regulators granted the company permission to found Wal-Mart Canada Bank of Mississauga, Ontario. It quickly put its own credit card on the market north of the border.

So it’s no surprise that after more than a decade of attempts to get into U.S. banking and, failing those, to expand nonbank financial services, the world watches to see what the behemoth of Bentonville will do next in the world of consumer financial services, whether it will eventually acquire a charter as it did in Canada in 2009, or whether it will continue to expand nonbank financial services. It cannot take, hold and invest deposits like a regular bank; but it’s certainly free to lend.

Wal-Mart’s desire to offer banking services is not new, and it has been making progress over the years. The potential advantages to Wal-Mart are many, ranging from offering new products and services to entice a wide variety of customers to visit, and spend, at their stores, to creating new revenue opportunities.

Wal-Mart’s efforts have enabled the company to create or extend relationships with the unbanked and underbanked, as well as reaching out to those banked customers who are looking for lower fees and interest rates. It will be interesting to see its impact in the markets in the near-to-intermediate term.

Click here to read more from the International Times.

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