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.
Posted by Eric Bull | Permalink
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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Posted by David Nassar, Executive Director | Permalink
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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Posted by Eric Bull | Permalink
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.
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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Posted by Alex Goldschmidt | Permalink
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]
Posted by Alex Goldschmidt | Permalink
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.
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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Posted by Media Team | Permalink
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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Posted by Alex Goldschmidt | Permalink
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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Posted by Alex Goldschmidt | Permalink
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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Posted by Alex Goldschmidt | Permalink
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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Posted by Media Team | Permalink
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.
Posted by Alex Goldschmidt | Permalink
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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Posted by Andrew Yonki | Permalink
According to the Dow Jones Wire, Senator Christopher Dodd, Chair of the Senate Banking Committee and 2008 Democratic Presidential hopeful, has circulated a draft of legislation that would narrowly limit the types of commercial companies that could own federally insured banks.
Wal-Mart’s banking application, along with Home Depot’s, created so much controversy when filed that the FDIC instituted an ongoing moratorium, freezing all pending applications until it received further guidance from Congress.
Dodd’s plan comes just two months before the moratorium is scheduled to expire. Wal-Mart, under heavy pressure from several sides, withdrew its application earlier this year, though Home Depot’s is still pending. After the filing, Ohio Congressman Paul Gillmor called for investigations into Wal-Mart’s attempt to enter the industry, concerned with the combining of commerce and banking:
Wal-Mart has previously attempted to enter the banking industry three times and in each instance, was rejected due to concerns regarding the mixing of banking and commerce. I would urge Chairman Powell to hold public hearings and proceed with caution when evaluating the merits of Wal-Mart’s application”, Gillmor said.
US Sen Dodd’s Plan Would Limit Commercial Ownership Of Banks [Dow Jones NewsWires, via SmartMoney]
WASHINGTON -(Dow Jones)- U.S. Senate Banking Committee Chairman Christopher Dodd, D-Conn., Thursday circulated a draft of legislation that would narrowly limit the types of commercial companies that could own federally insured banks.
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Posted by Corey Himrod | Permalink
Fed urges Congress to close banking loophole [MarketWatch]
Congress should close a loophole that has allowed commercial firms and foreign banks to own specialized banks known as industrial loan companies, the Federal Reserve’s chief lawyer said Thursday.
In prepared testimony, Scott Alvarez told the Senate Banking Committee that such banks operate outside of the rules governing commercial banks and that that is a concern.
“Corporate owners of ILCs operate outside the prudential framework and statutory activity provisions that apply to all other corporate owners of full-service insured commercial banks,” Alvarez told senators.
Giant retailer Wal-Mart was seeking such a bank but dropped its bid after critics heavily opposed it.
A moratorium on new applications to the Federal Deposit Insurance Corp. expires in January.
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Posted by Alex Goldschmidt | Permalink
Wal-Mart To Open Banks In Mexico As Soon As November [Associated Press via Wall Street Journal]
Wal-Mart Stores Inc.’s Mexico unit said Tuesday it has passed the final regulatory hurdle to launching its own bank in Mexico and will open branches as soon as November.
Wal-Mart de Mexico SA, the country’s largest retailer and private-sector employer, said the National Banking and Securities Commission on Monday authorized it to start banking operations. The new bank will operate under the name Banco Wal-Mart de Mexico Adelante.
“With Banco Wal-Mart we will be able to complement the services we provide to the segment of the population that currently lacks the benefits of having accessible banking services,” Eduardo Solorzano, president and chief executive officer of Wal-Mart de Mexico, said in a news release.
Solorzano, who will also serve as chairman of the board for the new bank, added that the new services “will allow us to continue fulfilling our vision of helping to improve the quality of life for Mexican families.”
Wal-Mart de Mexico currently has 964 commercial units in Mexico, including “supercenters,” restaurants and Sam’s Clubs.
Posted by Alex Goldschmidt | Permalink
BNet’s analysis of Wal-Mart’s current challenges, how the company fell from grace, and what its doing to stem its losses. If you’d like to read (cough) nearly all (cough) of what’s in this article, please consult the growth report we released in June (PDF). For further discussion of Wal-Mart’s extensive problems, visit BNet’s feature.
Why Wal-Mart Needs Help [BNet]
The world’s most successful retailer needs help. Although Wal-Mart generated gross profits of $84 billion on $349 billion in revenue in 2006, its share price has stayed virtually flat since 2000. Domestic same-store sales crept up by just 1.9 percentage points in 2006 — the worst showing in Wal-Mart’s history. International growth has been beset by humiliating failures. Public relations gaffes continue to dog the company, and there are few inefficiencies left to squeeze from Wal-Mart’s hyper-efficient distribution system. The worst part is, all of these problems are interrelated, and they’re coming to a head just as competition from rivals like Target and Costco is heating up. Let’s take a closer look at the issues that are dragging Wal-Mart down.
1. Domestic Saturation
The Summary: After years of U.S. expansion, Wal-Mart is running out of real estate.
The Challenge: Opening new markets by overcoming opposition in U.S. urban centers.
The Key Fact: Half of all Americans already live within a 10-minute drive of a Wal-Mart store.Most retailers will tell you, “If you have the opportunity to grow, you take it.” That’s just what Wal-Mart did, opening 2,200 Supercenters — its largest and most profitable store format — since 1988. Now, however, the company is confronting the realities of domestic saturation as it becomes harder and harder to find spots to erect new stores. “It’s a huge issue for them,” says Philip C. Bonanno, a management consultant with Management Ventures Inc.
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Posted by Alex Goldschmidt | Permalink
Retail consultant Burt Flickinger III weighs in on Wal-Mart’s financial problems. He calls the retailer’s quarterly earnings a “train wreck,” and explains that the stopgap measures Wal-Mart has been employing - cutting staff and raising prices - are no longer going to work. He calls for new leadership for the company, citing poor labor relations as one of the reasons why the retailer is struggling with its bottom line, and insists that financial problems will dog Wal-Mart until the deeper, underlying issues are resolved. From MarketWatch:
Transcript:
John Wordock: Two major retailers are reporting news. Wal-Mart says that it is cutting its estimate for the fiscal year, despite a nice 49% rise in net income, and Home Depot is also signaling some trouble: it is saying that the housing slump is taking a toll on its business. Joining us to talk about the impact that the slowing economy or the housing recession (as some are calling it) is having on these two major retailers is Burt Flickinger III, he the managing director at Strategic Resources. He’s a retail consultant. Burt, let’s tackle Wal-Mart first. What do you make of this news coming out of Wal-Mart?
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Posted by Alex Goldschmidt | Permalink
Woes mount for Wal-Mart [Toronto Star]
It was business as usual for Wal-Mart last Tuesday for a superstore opening in Peru, Ill., which is to say the mood was of righteous self-assuredness. A marching band played “The Star-Spangled Banner,” store manager Mitch Lippert whipped up his troops ("Who’s fired up!"), and Rev. Oscar Shepherd of Christ Family Foursquare Church sought the Almighty’s blessing “as we interact with each other in the marketplace.”
You’d never know Wal-Mart Stores Inc. was in a heap of trouble.
The company’s growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the “beast of Bentonville.” Average annual profit growth lags that of Target Corp., Costco Wholesale Corp. and other competitors. Wal-Mart’s repeated efforts to push upscale merchandise have ended in tears. Expansion at home is still thwarted by hundreds of U.S. communities; and several forays abroad are struggling or have been scrapped. The stock price is down 32 per cent since the turn of the century, when CEO Lee Scott took the reins, while the Morgan Stanley retail index has soared 180 per cent.
If Wal-Mart wasn’t 40-per-cent controlled by the heirs of founder Sam Walton, an “activist investor” like Carl Icahn or Kirk Kerkorian would be calling for Scott’s head and the spin-off of Sam’s Club, an also-ran to Costco.
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Posted by Alex Goldschmidt | Permalink
Brave New Films’ “Wal-Mart: The High Cost of Low Prices” will be airing throughout July on the Starz network. It’s a great chance to see the movie if you haven’t already, or to introduce friends and colleagues to the issues raised in the film.
The director’s cut of the film will be airing on the following dates:
| Starz Cinema July 25, 11:15 am | Starz Cinema July 25, 8:20 pm | |
| Starz Cinema July 26, 3:14 am | Starz Cinema July 30, 6:00 pm | |
| Starz Cinema July 31, 4:00 am | Encore Drama August 21, 2:20 am |
Be sure to also check out some of the bonus scenes that were not included in the film.
Click here for more info on the screening.
Posted by Alex Goldschmidt | Permalink
Wal-Mart’s bank gets hotly debated in BusinessWeek and Advertising Age today. The main argument in favor of the company getting into banking? It’d be better than loan sharks.
In a classic case of being the lesser of two evils, Wal-Mart’s financial services are a far cry from the poverty cure Advertising Age paints them to be. While it’s true that Wal-Mart’s rates are lower than check cashing services, neither are sustainable routes to fiscal solvency for low-income shoppers. The fact remains, as Advertising Age points out, that exploiting the poor is a big market and is indeed one of the ways Wal-Mart makes its billions.
Wal-Mart: Stay Out of Banking, Period [BusinessWeek]
Pro: Not in the Best Interest
The Independent Community Bankers of America (ICBA), representing 5,000 small financial institutions nationwide, strongly opposes the entry of commercial enterprises such as Wal-Mart (WMT) into retail banking. ICBA has nothing against Wal-Mart stores, just Wal-Mart banks.Con: Simply Filling a Need
The hue and cry over Wal-Mart’s attempts to expand its financial-services business is largely motivated by a single fact: The company will offer these services at a lower cost to the consumer, taking revenue away from competitors that happen to include banks. So what else is new?
Forget Going Upscale—Wal-Mart Should Serve Needs of Poor, Seniors [Advertising Age]
Serving the poor is a big market, and providers like to say how proud they are to give credit and debt products to people who couldn’t get them from traditional lenders. But the interest they have to pay for such services is astronomical, and many people are left holding the bag for thousands of dollars in interest or being unable to pay their mortgages, leading to the current subprime-lending mess.
More on Wal-Mart’s banking practices >>
Posted by Alex Goldschmidt | Permalink
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