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By this time we should all be aware of the controversies surrounding credit companies - in addition to increasingly complex and confusing options for credit applicants, credit card issuers have been raising interest rates and fees for many current borrowers, many of whom were in complete compliance with their card holders’ agreements when their rates were raised. This is a major reason behind the call for continuing credit card reform.

What many people might not be aware of is the struggle between credit companies and the retailers at which their cards are used. As Bloomberg explains, this could end in a giant Visa vs. Wal-Mart rumble:

Lawmakers are promising new rules to bring down the interchange fee, a charge on purchases sometimes topping 3 percent that’s split by the two banks serving the customer and merchant. Supporters of the legislation include the biggest retail chains, restaurants and small businesses, which say the fees erode profit and inflate prices...Interchange is the second-biggest cost after payroll, Target said, and merchants want to negotiate lower payments collectively without running afoul of antitrust law.

The issue has become such a hot topic, the Government Accountability Office has been ordered to study the effect interchange fees have on both consumers and merchants. The “interchange fee” is the fraction of every credit card transaction that the card’s issuer retains. When combined with additional smaller fees levied by a retailer’s own bank (to which the retailer first submits the transaction), interchange fees can cut into retailer revenue - especially important for those retailers with slim profit margins.

Interchange fees have risen over time - interesting, since technological advances would suggest the cost of such transactions should go down - and the result is a growing battle between retailers and card issuers. Wikipedia provides a surprisingly simple example of how the fees work:

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Our wallets are getting sore these days. After billions already in taxpayer handouts, it turns out that Bank of America executives will need another $34 billion dollars from us.

Do they deserve it? Are they grateful for the billions they’ve already received? Are they trying to use the money judiciously?  Not unless you count corporate jets and bloated executive salaries as responsible spending.

Bad corporate behavior by Bank of America is nothing new. They have a long history of doing things that put America at risk.

So with everything we know about Bank of America, it seems like Americans should be wary of letting a company like Wal-Mart anywhere near financial services.  Everyone knows of Wal-Mart has a long history of putting its own interests ahead of anyone else.  We know Wal-Mart doesn’t pay its taxes, it steals time from its workers by violating simple laws like lunch breaks, and it sells unsafe products that hurt or even kill people.  So how can we trust it with a bank?

A couple years ago, Americans decided they couldn’t and thousands wrote the FDIC to petition the agency to block a Wal-Mart bank application.  But since then, Wal-Mart has been trying to edge their way back into the money game through the back door.

Over the last few years, Wal-Mart has developed an interest in providing alternative financial services - including check cashing, general purpose prepaid cards, money order purchase and bill payment - to unbanked and underbanked consumers. Among regular check cashing store customers, 92% shop at Wal-Mart at least once per three-month period. Still, less than half of the surveyed population cash checks at Wal-Mart stores, with most preferring traditional check cashing centers due to a perceived convenience.  Wal-Mart sees this potential to expand their business.

‘Alternative’ financial services are a lucrative market these days; a study by First Data, a financial transaction technology company, found that 78 million Americans either use no financial services, or are underserved. Given that many of these customers are lower-income and many shop at Wal-Mart, it’s no wonder the retailer sees an opportunity.

Another report from Aite Group, an industry research and advisory firm, puts Wal-Mart’s current market share of ‘alternative’ financial services at 11%. Some analysts, including Seeking Alpha, claim that the retailer has distinct advantages in offering financial services: in-store convenience, and potentially lower costs than check-cashing or money wiring businesses.

Right now is a time for better, more accountable banks. Not Wal-Mart banks.

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It’s everyone’s favorite time of the year again: Consumerist’s “Worst Company in America” competition.

Wal-Mart just breezed by Best Buy 55% to 45% to land a spot in the elite eight. But in the next round, Wal-Mart faces an entirely different level of competition: AIG.

We’re realists—we know Wal-Mart is looking at an uphill battle to win this one. And while we also know the incredible extent to which companies like AIG deserve their rotten reputation, here’s a few reasons why we’re confident some of our faithful will still pull the lever for Wal-Mart.

1. Aubretia Edick works for Wal-Mart, not AIG. AIG’s executives screwed over America - but did they treat their own workers worse than Wal-Mart?

2. AIG is the new kid in town and is getting all the attention. But Wal-Mart’s track record over time is unmatched.

What do you think? Is the fact that Wal-Mart has to square off against AIG for a “worst company” award victory enough?

Go vote now!

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The battle for the heart and soul of Mexico’s banking industry is reaching a fever pitch, with the Mexican government’s two chambers—the House of Representatives, and the Senate—fiercely divided over proposed changes to the country’s banking laws that would allow so-called “corresponsal banking”. The concept would literally mean that any of Mexico’s countless small corner stores or shops could offer limited banking services, such as check depositing, through partnership with larger banking entities.

In theory, any bank with sufficient size to set up “corresponsal” relationships with shops could participate, from microcredit institutions that targets loans to Mexico’s poor, to multinational giants. But one key provision in the bill will actually affect whether giants such as Wal-Mart can effectively do so: the provision says that banks must raise no more than 25% of their deposits from the “corresponsal” locations. This would mean Wal-Mart could not offer banking services in-store as such services would be counted as “corresponsal” (as opposed to “brick-and-mortar” banking) and would surely exceed 25%. Mexico’s House of Representatives wants financial regulators to have the ability to override this restriction for certain banks, and this would no doubt provoke a flurry of intense lobbying from Wal-Mart.

Although Mexico is Latin America’s second-largest economy, it lags far behind other countries in offering financial services to its population, especially to poorer consumers. So why is more convenient and lower-cost access to financial services a bad thing? Passing the new law without the 25% restriction would encourage Wal-Mart to aggressively pursue a stranglehold on the market as many lower-income consumers already shop there. The retailer, however, has proven that it does not have the consumer’s best interests at heart: the interest rate on its store-brand credit card is an exorbitant 69.6%, high even by Mexican standards.

Additionally, Mexico is a dangerous country where bank robberies are frequent; turning “every Wal-Mart cash register into a bank” would only make customers and cashiers more attractive targets. Though the law is a good idea, it is intended to encourage growth for Mexico’s burgeoning microcredit businesses and small shops: not retail giants.

The original story in the Financial Times is republished below:

Go to any corner shop in Mexico and the chances are there will be a cluster of people buying avocados, detergent, green tomatoes and nopales – cactus paddles best served fresh from the grill.

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The Connecticut Post ran a story over the weekend that serves as yet another signal Wal-Mart is looking to extend its financial services department. The feature focuses on Wal-Mart seeking to expand its check cashing services into Connecticut, announcing in television advertisements that it will cash a paycheck for up to a $3 fee, and hopes to be providing the service within a year in Connecticut, after it gets licensed.

Wal-Mart has actually been in the check cashing business for quite a while now - in 2004 the retailer began allowing customers to cash their pre-printed payroll or government-issued check, including tax refund checks, at designated registers in Wal-Mart Stores and Neighborhood Markets in 44 states. In the others (Connecticut, Massachusetts, New York, New Jersey, Nevada, Rhode Island) Wal-Mart was applying for a license to do so. In 2007, Wal-Mart announced plans to open 1,000 in-store MoneyCenters aimed at serving people without traditional bank accounts, and also debuted a reloadable, prepaid Visa debit card that didn’t require a bank account or proof of U.S. citizenship.

Since then, Wal-Mart has received a check cashing license in Massachusetts, and apparently continues to try for one in Connecticut. As it is, CT allows retailers to cash checks without a license, but they cannot charge more than 50 cents per check. With a license, Wal-Mart could charge up to 2% of the amount cashed, although Wal-Mart has maintained that it will charge no more than $3 per check. It sounds like a modest amount per check, and indeed, it could be a substantial savings over check cashing outlets or banks where charges can reach $10-15 per transaction. Still, this is most likely nothing more than a way for Wal-Mart to attract more sales in its stores, while breaking further into a business retailers have generally shied away from.

Hank Shyne, executive director of the Financial Service Centers of America Inc., was well aware of Wal-Mart’s move and said it is something his group is paying attention to. He added regulations in the various states make it difficult for the retailer to come into the business. But it is a big and attractive market, he said. “There are a lot of people who live paycheck-to-paycheck and need the money immediately,” Shyne said. In New York in 2007, there were 32 million checks cashed worth $16 billion. “Nationwide it’s more like a $160 billion business.”

It wouldn’t be surprising if the ad push is ultimately aimed at getting more people using its MoneyCenters, and its reloadable debit card in particular.

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The saga of Wal-Mart’s efforts to provide financial services to Mexican consumers took a new twist today with word that Mexico’s Congress will consider legislation to fix the maximum interest rate that the retail giant and others can charge consumers. The move, initiated by the National Action Party (PAN), is surprising since PAN is known as Mexico’s pro-business party and in 2007 moved to enable Wal-Mart to offer banking services in-store for the first time. Nonetheless, critics have charged the government with failing to protect consumers from the exorbitant interest rates lenders, including Wal-Mart, charge. Wal-Mart spokesman Antonio Ocaranza has commented that Wal-Mart’s 69% rate on its credit card is “pretty low for this type of product”. Evidently, some in Mexico’s government do not agree.

The full story text is below:

Calderon’s Party Will Propose Law Lowering Loan Rates

Senators from Mexican President Felipe Calderon’s party will propose legislation to lower interest rates on loans, Senator Gustavo Madero said.

The proposal may set maximum interest rates that banks and other companies can charge consumers, said Madero, who is the senate leader for the National Action Party. The measure will replace or expand upon an initiative introduced in Congress last month that aimed to cap credit card interest rates, Madero said.

“Rates are too high,” Madero said late yesterday in an interview. “We’re going to address the cost of credit not only at banks, but also through commercial companies.”

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Wal-Mart’s invasion of the Mexican banking sector continues. Last year, the Mexican government granted Wal-Mart the authority, making them only the second retailer in Mexico to do so, to set up banking operations at its stores. Wal-Mart Bank started fast, with 115,000 new clients its first year and opening service desks in 357 stores, according to an article in Mexico’s El Milenio. That growth may be under challenge, however as this December a law passed the country’s Senate that would potentially prevent Wal-Mart from banking at all.

The bill, originally aimed at providing protections to Mexican consumers who use financial services by outlawing banks from sending pre-approved credit card and other offers by phone or mail, and increasing competitivity in the banking sector, was not satisfactory to Mexico’s major banking players, mostly multinationals like Citigroup and HSBC. Before the bill passed, the banking lobby demanded that the Senators include an Amendment limiting the amount of a bank’s total deposits taking place outside traditional “branch” locations to 25%. To get around the proposed law, the National Banking and Securities Commission, which according to one leading Mexican columnist is hell-bent on deregulating the financial sector, intends to use an administrative measure to authorize Wal-Mart to operate each one of its cash registers in its stores “as if it were a bank branch”.

Considering the disastrous effects financial deregulation and predatory lending practices have had on the U.S. economy, and considering Wal-Mart’s track record of offering exorbitant interest rates on its store-brand credit card, these latest maneuvers give serious cause for concern. Furthermore, in banking with Wal-Mart, Mexican consumers might not suffer only financial, but also physical harm; due to Mexico’s enormous problems with fraud and robberies, traditional branch banks in the country today are heavily guarded and the multinational banks use numerous electronic and physical security measures to protect their customers; these protections would be mostly absent at Wal-Mart’s nationwide cash registers.

The original article (translated) in Mexican newspaper La Jornada is printed below:

In spite of the fact that the [Mexican] Senate set limits on banks’ ability to offer financial services through third parties, such as retail stores now labeled so-called “bank branches”, the National Banking and Securities Commission (CNBV) put forth an administrative measure to give Wal-Mart authorization for each one of its cash registers to become a bank branch.

This kind of authorization has been denied the retailer by U.S. authorities, said analysts.

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Wal-Mart has a long history of aggressively pushing into Mexico’s banking sector, and trying to keep various forms of payment within its stores. For example, earlier this year Mexico’s Supreme Court criticized Wal-Mart’s practice of compensating its employees with “voucher” cards only redeemable for goods within Wal-Mart stores, comparing this program to the existence of “company stores” under early 20th Century Mexican dictator Porfirio Diaz. Additionally, Wal-Mart also offers its own brand of banking services in-store, a practice that so far is illegal in the U.S. While Bancomer customers’ ability to pay credit card bills at Wal-Mart cash registers might seem beneficial, it could significantly draw business away from other banks who do not have access to the retail giant. And the move is particularly suspicious because Bancomer already administers Wal-Mart’s own brand of credit card, according to a recent USA Today story. With its own credit card, Wal-Mart has not exactly given fair lending terms: the card carries a whopping 69.6% annual interest rate, high even by Mexican standards. And given the recent financial crisis, caused in part by irresponsible lending practices, there is serious reason to doubt whether Wal-Mart’s offering of financial services to Mexico’s low- and middle-income consumers will serve their needs, or only drive them further into debt.

Mexican Customers Now Able to Pay Bancomer Credit Card Bills at Wal-Mart [El Sol de Mexico, 11/11/08]

Starting this week, [Mexican bank] BBVA Bancomer’s 5 million customers will be able to make credit card payments in Wal-Mart stores across Mexico, as part of the retailer’s and bank’s common strategy.

Bank customers will be able to make the payments in 745 locations of Wal-Mart de Mexico, including in different store formats, without paying additional fees and during more extensive hours than Bancomer’s own branch locations. They will be able to make payments 365 days per year in Wal-Mart, Bodega Aurrerá, Sam’s, Superama and Suburbia nationwide, taking advantage of the comfort, security and flexible hours that these stores offer.

Bancomer’s Director of Credit Cards and Consumer Banking, Rodrigo Manrique, commented that “the objective is to offer our customers more ways, and broader hours, to make their payments conveniently. Through this agreement, Wal-Mart de Mexico will receive an increased flow of customers in its stores, and both institutions will boost customer loyalty by offering them a superior service”.

For his part, Raúl Argüelles, Senior Vice-President of Corporate Affairs and Human Resources for Wal-Mart de Mexico, indicated that this commercial alliance permanently adds value to what his company offers to clients.

At the moment of paying at cash registers, users of this service will obtain a receipt of the transaction that has taken place, which they should keep since it will function as proof of payment should any further clarification be necessary. For the customer’s benefit, Bancomer will consider the day this transaction takes place, in any Wal-Mart de Mexico location, as the date of payment.

See the original article in Spanish here

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Wal-Mart doesn’t have a bank yet in the U.S., but that isn’t stopping ‘em from forging full-steam ahead in Canada and Mexico.

In classic shrewd fashion, Wal-Mart seems to be using the financial crisis and the credit crunch to its advantage. Today’s story in PR Week isn’t the first to imply that Wal-Mart’s application for a bank in Canada might be “received favourably” by officials in a weak economy.

The story also noted for the umpteenth time that:

Wal-Mart Canada did not return calls for comment. In its notice, the retailer did not disclose what kind of banking services it would provide, but it is expected to offer credit card, mortgage, and investment products.

Meanwhile, a Bloomberg News story today tells us that Wal-Mex’s bank is growing. Wal-Mart de Mexico SAB is charging ahead south of the border and planning to unload 100,000 credit cards on Mexicans, targeting primarily the 75 percent of the population who’ve never had a bank account.

Issuing more credit cards as Mexico’s economy slows would allow Walmex, as the company is known, to collect annual interest of as high as 75 percent and encourage purchases of more expensive appliances and furniture at its stores, the only place the cards can be used. Walmex is preparing more financial products aimed at customers who have never had a bank account, about 75 percent of Mexico’s 103 million people.

In case you missed that: Wal-Mart is encouraging Mexicans to go in debt at 75 percent interest.

Presumably, Wal-Mart is trying to set up working bank operations in Canada and Mexico before trying again to apply in the U.S. And now they seem to be using the financial crisis as another tool to get into the banking game.

They certainly can’t expect us to keep quiet about any it.

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No matter how many times Wal-Mart fails to create a “Bank of Wal-Mart,” the company always seems to find a way to bring it back to life.

Seven months ago, we helped keep Wal-Mart out of the banking business. But now, the Federal Reserve is looking into changing the rules completely - and may throw open the door to giant corporations like Wal-Mart to run their own banks.

At a time when our economy is already in crisis, we can’t turn the banking industry over to Wal-Mart. Please write a note to Fed Chairman Ben Bernanke and the Banking Committee leaders in Congress, and let them know what’s at stake:

http://action.walmartwatch.com/NoBankofWalmart

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After getting shut down in U.S., Wal-Mart looks to lock up the other 2/3 of the continent by getting a bank permit in Canada.

Saturday, Wal-Mart posted its mandatory public notice of its official bank application to the Office of the Superintendent of Financial Institutions. The bank would theoretically be based in Mississauga, Ontario, but there’s no real timeline yet or any indication if the same opposition that rose quickly in the U.S. to block Wal-Mart’s bank will arise in Canada.

So what does it all really mean?

Several analysts have said so far that Wal-Mart’s entry in banking wouldn’t pose a huge threat to the Canadian banking establishment - in the near future, at least. Wal-Mart Stores already offer financial services like money transfers and cash withdrawals, but a banking license would allow the company to greatly expand what it offers. Spokesman Kevin Groh cited credit cards as an immediate first step for Wal-Mart, but also listed as possibilities “savings accounts, loans, mortgages, RSPs, GICs...”

The consensus, at least as of now, appears to be that Wal-Mart’s focus is still retail-based: rather than targeting the Canadian banking sector, it’s targeting other retailers by using the new offerings to pull in more customers and squeeze more dollars out existing store customers. (Wal-Mart Canada Andrew Pelletier said that the company doesn’t plan to open up traditional bank branches “for the foreseeable future”...)

As Wal-Mart tries to furiously expand and eat more market share in Canada, this is an edge it seems desperate for.

The Holy Grail for Wal-Mart, of course, is a bank in U.S. They’ll no doubt try again, but for now Wal-Mart will have to settle on our neighbors to the South and (they hope) North.

Wal-Mart Canadian Unit Seeks to Offer Bank Services [Bloomberg News]:

Wal-Mart Stores Inc., the world’s biggest retailer, applied to the Canadian government for official bank status that would allow it to expand financial services in the country.

Wal-Mart’s Canadian unit has applied to the minister of finance to establish a bank under the name Wal-Mart Canada Bank and, in French, La Banque Wal-Mart du Canada, according to a notice posted Sept. 13 on the Canadian government’s Web site.

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We all just feel bad about this one. There’s not really much more we need to say here - Wal-Mart’s actions pretty much speak for themselves. We can only offer our condolences to the poor recipient of Wal-Mart’s customer service.

Wal-Mart Tosses Student In Jail For Trying To Cash Real Money Orders, Then Sends Her A Bill [Consumerist]

Nitra Gipson sold her car to pay for her last two semesters at Texas Southern University, where she is studying criminal justice (of all things), and was paid with Wal-Mart Money Orders. When she tried to cash these money orders at her local Wal-Mart she was arrested and charged with felony forgery — even though the money orders were real.

“Humiliating is not the word for it,” Gipson told KHOU news. “I was horrified. I think they singled me out because of the amount of money that it was and (thought) I was trying to get over on them.”

Nothing she did convinced the Wal-Mart manager to drop the charges. Finally, after 48 hours behind bars, the District Attorney’s office released her after she provided the purchase receipts. You might think that was the end of Ms. Gipson’s ordeal. Nope.

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Wal-Mart has long been heralded as a leader in information technology. The company’s complex inventory tracking and employee scheduling systems have helped the retailer earn its record profits. It’s surprising, then, that the retailer announced today plans to outsources its financial systems.

The news comes several months after Wal-Mart was deemed “behind the curve” with its financial technology. A 2007 article from CIO.com blames Wal-Mart’s outdated information system for the company’s failure in South Korea and Germany, as well as the retailer’s past financial problems.

SAP is the lucky company tapped to take over the retail giant’s IT needs. Optimal Solutions focuses on what this means for SAP, noting that the deal will inevitably earn the systems company hundreds of millions of dollars, and not just from Wal-Mart:

This about face on packaged software represents a double win for SAP, for where the mighty Wal-Mart goes, other retailers are sure to follow.

And the process won’t be cheap. The cost of moving Wal-Mart’s massive databases promises to be expensive, and the notoriously-stingy company has decided to go ahead with the shift despite the cost. Information Age notes that the system won’t become profitable for several years. And though it’s increasingly clear that Wal-Mart’s systems need an upgrade, experts still debate the benefits of companies like SAP.

What will this mean for Wal-Mart’s other in-house systems? Will RFID soon become outmoded and cumbersome to replace.

Wal-Mart launches global IT system [Financial Times]

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With little fanfare, Wal-Mart discontinued its Wal-Mart-branded debit card last week, and launched a new card with different consumer traps attributes. BloggingStock’s Brian White gives a rundown of the new card’s features, and notes that Wal-Mart is now directly competing with banks, despite claiming it’s not interested in consumer banking.

The company claims these money cards help “unbanked” consumers - those who, for whatever reason, don’t have bank accounts. But as we’ve mentioned earlier on this blog, it’s just another way that Wal-Mart hopes to profit off poverty. If Wal-Mart was really concerned with its low-income customers, maybe it could try sustainable community investment on for size.

The Wal-Mart Weekly: Meet Wal-Mart’s new debit card. Now it’s competing head-on with banks [BloggingStocks]

In this week’s Wal-Mart Weekly, I’ll be looking at the entry (although indirect) of Wal-Mart Stores Inc. into the consumer banking industry. While it may seem a stretch to think that Wal-Mart’s new debit card program is anything but a way to help consumers, it could be positioning the retailer as a new banking partner for many consumers as well as adding handsomely to the retailer’s bottom line.

You have to make money to spend money
Wal-Mart recently discontinued its Wal-Mart Debit/ATM card, but has now replaced it with a newer “debit card”. What’s the difference, you ask? Let’s break it down a bit.

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Wal-Mart de Mexico is going forward with plans for a bank that were overruled here in the U.S. The company’s banking cards’ high interest rates have raised concerns among consumer advocates. But fairness aside, the company’s move is a clear double standard between unbanked customers here and those in Mexico.

Wal-Mart Rolls Out Bank in Mexico [Arkansas Business]

After failing to land a bank charter in the United States, Wal-Mart Stores Inc. took its plan south of the border.

On Nov. 12, Wal-Mart opened the first four branches of Banco Wal-Mart in Mexico. Banco Wal-Mart already has 22 locations and is expected have at least 80 by the end of the year.

Meanwhile, Wal-Mart’s plans to open a bank in the United States appear to be dead.

Earlier this month, the Senate Banking Committee approved a bill that would prevent retailers from owning the sort of limited bank charters that Wal-Mart previously had sought, just as they are prevented from owning commercial banks. The bill now is headed to the full Senate for a vote, but a date hasn’t been set.

If the bank ban passes, Wal-Mart doesn’t appear to mind.

“There are no such plans at this time” to pursue a bank in the United States, Wal-Mart spokesman Kevin Gardner said last week in an e-mail statement to Arkansas Business.

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For years, Wal-Mart has been trying to take over the banking industry by establishing the “Bank of Wal-Mart.” With an industrial loan charter from the FDIC, Wal-Mart could make huge profits from credit cards, mortgages and loans.

Thanks to concerned citizens, that hasn’t happened. After thousands of people contacted the FDIC in 2006, it placed an 18-month moratorium on all new ILC applications—including Wal-Mart’s.

Unfortunately, that moratorium ended February 1st.

The expiration of the FDIC moratorium opened the gate for Wal-Mart and other commercial retailers to apply for and obtain an ILC charter. In fact, within five days of the moratorium expiring on January 31st, Ford Motor Company applied for a charter. 

The Senate Banking Committee is currently considering legislation to permanently block commercial retailers like Wal-Mart from having ILCs. Please use our simple tool to write a letter to the committee, and ask them to close the Bank of Wal-Mart loophole and pass this important bill. Click on:

http://action.walmartwatch.com/bankofwalmart

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After failing in its efforts to open banks in the U.S., Wal-Mart has done just that at its stores in Mexico. The banks are targeting low-income shoppers, enticing them with a low minimum balance of just five dollars. Those promises are two-faced, though: interest rates on savings are lower than almost every other bank (at just 1%) and loans are at a staggering 75% APR. In doing this, Wal-Mart perpetuates a vicious cycle of poverty, a cycle which the retailer has come to depend on for its customers.

Wal-Mart gets its bank - in Mexico [Fortune]

For years, Wal-Mart tried to enter the U.S. banking business, but it gave up in 2007, pulling its application after endless outcries from domestic retail banks. Now it’s found a more receptive audience south of the border. In November, Wal-Mart de México opened its first consumer bank, Banco Wal-Mart, in Toluca; the company plans to launch 80 more by the end of the year.

Toluca, a sprawling industrial town near Mexico City, seems like an unlikely place for Wal-Mart’s maiden push into banking. But there, in a strip mall, beside a bakery and a beauty parlor, Norma Pacheco is mulling a Wal-Mart account. “I’d use it to pay for my Wal-Mart purchases,” says Pacheco, a 42-year-old engineer. “The brand gives me confidence.”

Pacheco isn’t the client Wal-Mart de México is ultimately after. Mexico’s biggest retailer, with 668 stores, wants to crack the low-income market in a country where just 24 percent of households have savings accounts, compared with 55 percent in Chile. Wal-Mart plans to boost sales via debit cards, later ease users into more profitable services like insurance, and make money on interest-rate spreads. Early signs are promising. Héctor Aguila, the bank’s manager, says that about 40 percent of the new clients who have signed up at dedicated desks in the store since the bank’s November launch have never had an account of any kind.

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What do Wal-Mart and Home Depot have in common? 

In addition to their sprawling size, both retailers wanted to buy banks in Utah and have submitted applications to the FDIC for industrial loan charters (ILCs). This week, Home Depot followed Wal-Mart’s lead and made the decision to pull their application to purchase a bank in Utah. 

Wal-Mart has been attempting to make their move into the banking industry for years. If granted, the ILC would have allowed the retailers to make profits from credit cards and loans, a move that would be devastating to our economy.

Home Depot has withdrawn application to buy a Utah bank [The Wall Street Journal]

Home Depot Inc. has decided to withdraw its application to buy a Utah bank, ending its plan of venturing into the home remodeling loan business.

The Atlanta-based retailer had applied in May 2006 to the Federal Deposit Insurance Corp for approval to purchase EnerBank USA, a Salt Lake City industrial loan corporation. But the application was one of several sidelined by a Congressional brouhaha over whether commercial enterprises such as retailers should be allowed to enter the banking business.

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Yesterday’s post on food banks raised the issue of Wal-Mart’s charitable donations and whether they actually benefit the community, but the question goes far beyond donations of food. Wal-Mart loves to be seen donating money to local charities, especially around the holidays. These donations, while perhaps beneficial in their own small way, don’t even begin to make up for the amount of resources and taxpayer dollars Wal-Mart drains out of local economies. For Wal-Mart, these donations are nothing but some cheap PR.

Wal-Mart lowers median wages, exports jobs, shifts company costs to taxpayers, and leans on public subsidies to make its billions. These costs far outweigh any local donation Wal-Mart has ever made.

Wal-Mart’s charitable donations continue to lag behind its close competitors, and the Walton Family itself is ranks only 37th on the list of generous donors. But perhaps more tellingly, is that Wal-Mart donates most to charities in its own best interest. From the National Center for Responsive Philanthropy:

“Behind the Wal-Mart facade, the goals of the company and the family have nothing to do with promoting the community’s or the public’s or even their customers’ interest. Instead, there is one goal, and that is to make one of the wealthiest families in the country even richer.

Wal-Mart’s donations to little league teams and nursing homes also pales in comparison to the company’s donations to non-profits, think tanks and individuals willing to lobby on its behalf or grant favors in return. In doing so, Wal-Mart buys the power necessary to continue harming communities and getting away with it. Think Wal-Mart’s generous? Maybe so, but only to itself.

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If you build it, they will come.  Wal-Mart doesn’t offer banking in the US, but does to its customers in Mexico, at interest rates as high as 86%.  In many cases, Wal-Mart is the only place where the service is available, giving the company a virtual monopoly.  Lax regulations in Mexico allow these “industrial loan corporations,” whereas regulators blocked Wal-Mart’s attempt to do the same in the U.S.  Wal-Mart’s entry into banking further widens the reach and pervasive influence of the massive retailer.  It’s also a very convenient way to make more money off of its employees.

Wal-Mart Banks on the ‘Unbanked’ [BusinessWeek]

Its new Mexican lending arm taps a fresh source of growth

Every day 2.5 million people walk through the doors of a Wal-Mart (WMT) store in Mexico, generating nearly $20 billion in sales last year. Now they are potential customers of Banco Wal-Mart, the chain’s new lending operation. So are the company’s 12,000 Mexican suppliers, as well as its 155,000 employees. “We want to leverage this traffic we have in our stores,” says Julio B. Gómez, Banco Wal-Mart’s chief executive.

As in the U.S., Wal-Mart is Mexico’s largest retail chain. It has 997 locations, including supercenters, food and clothing stores, and restaurants. It has diverted many Mexicans from traditional commerce and stirred occasional opposition from local merchants. But the president of Mexico’s central bank, for one, publicly credits Wal-Mart’s high-volume, budget-conscious retail strategy with helping tame inflation to the low single digits. Mexican regulators say they expect the newly chartered Banco Wal-Mart to spark competition that eventually could lower the cost of consumer borrowing.

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