Busted: Bankers and The Global Economy

May 2, 2008

Wal-Mart Picks Bankers Pockets?

For some time, Wal-Mart has been quietly competing with banks. Some banker lobby groups have taken notice and are raising attention in the banking industry. Wal-Mart is giving “unbanked” consumers in lower-income brackets opportunities in financial services that are often overlooked by traditional banks. Wal-Mart is stepping in to fill an unmet “niche” need.

Newly jealous bankers admit that Wal-Mart enjoys a thriving business in financial services, even without a banking charter, not unlike Sears Roebuck did in the 1970s. The lobbyists make the point that Wal-Mart also leases space in many stores to banks. It has formed alliances with financial services providers like MoneyGram and DiscoverCard. Wal-Mart cashes payroll checks for customers, provides money transfers, and offers money orders. It even offers a variety of financial services products through Wal-Mart Money Centers by SunTrust. Recently, the company gained approval in Mexico to open banks, and it won’t be long before Wal-Mart revisits their USA banking strategy. In the banking world, Wal-Mart is a force to be reckoned with.

Estimates are that as many as 20% of Wal-Mart’s customers don’t have a checking or savings account. These “unbanked” consumers represent an untapped market typically overlooked by traditional banks. What bankers fail to realize is that they single-handedly created most of the unbanked customers through predatory practices and high fees.

Wal-Mart has the largest information-technology system of any private company in the world and are using that system to serve their customers.

According to the banker lobby, Wal-Mart “makes money on money” by turning inventory before they’ve even paid for it. What does that have to do with banks except that they do essentially the same thing with money?

With 4,000 stores in the U.S., Wal-Mart already has the store network to reach customers in every state in the country. Wal-Mart is perfectly poised to meet the need of their customers for banking services at very low cost with a very small profit margin.

Bankers want to pick Wal-Mart’s pockets, but do they have a chance? The banker lobby has pointed out to its members that doing things the same way while expecting the same or better results is insanity. The failure to adapt often results in failure. Bankers have been good at realizing failure lately and for good reason. Even their more creative measures have resulted in self-destruction because banks have failed to deal with the bread and butter of the finance world. Getting rich quick has been and still is the main desire in today’s banking scheme.

The banker lobby is now suggesting a retail approach to banking in order to compete with retailers like Wal-Mart that offer banking services based on price, operations, culture, key item promotion, expense control, talent, and service. Last I heard, that is the forgotten basics of the hum-drum of the business world. Have bankers forgotten such lowly concepts? Apparently bankers have forgotten, but with the problems they have recently faced with profitability, any measure of income looks good. Some bankers are drooling at the prospect of competing with Wal-Mart.


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