Wal-Mart Corp is believed to be seeking a bigger presence in the US financial sector after launching an in-store banking pilot in 16 stores, together with community bank, National Commerce Financial Corp, last October. The financial terms of the partnership between Wal-Mart and National Commerce were not disclosed, but the alliance is significant in pairing the country’s largest retailer with a pioneer of in-store banking. In fact, Tony Plath, professor of finance at the University of North Carolina, argues that “it’s not a question of if Wal-Mart is going to get banking power”, but “when it’s going to happen”.
Money orders and fund transfers are already available at Wal-Mart, which has made no secret of wanting to infiltrate the financial services area as a way to better serve its customers and generate extra revenue. Plath’s view is that if Wal-Mart did enter the banking industry, half of all community banks in the US could be eliminated, since both entities would serve customers who are underserved by retail banks. Under the Wal-Mart-NCFC tie-up, 16 existing NCFC branches inside Wal-Mart stores were renamed as Wal-Mart Money Centers, which will continue to be operated and staffed by NCFC employees.
Plath also believes Wal-Mart’s partnership with National Commerce could be a preliminary move to learn the banking business before another effort to enter the financial industry, on the basis that “Wal-Mart didn’t create a financial services division so that they could put ATMs in their stores”. During 2002, Wal-Mart tried to buy a California-based industrial loan company (ILC), but was blocked by state legislation. However, two bills in Congress would now allow Wal-Mart to get into banking, the Arkansas Business Journal reports, potentially by acquiring an ILC, which are not regulated by the Federal Reserve.
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