Is Wal-Mart getting ready to do to community banks what they did to community hardware, toy and clothing stores? It appears that way. Initially, the new Wal-Mart Utah Industrial Bank will only process credit card & check transactions, but why should the world's most aggressive low-cost provider stop there? How about a bank for employees? Later on, all those leased bank locations in the over 2,500 U.S. Wal-Mart stores could become Wal-Mart Banks. Overnight, Wal-Mart would be one of the largest retail financial service providers in the US.
The good news is that consumers might get a better deal. Plus, there are no small manufacturers to squeeze. But the mere size of Wal-Mart gives them financial economies of scale that your local bankers cannot provide. Say "goodbye" to local banks sponsoring local non-profits and local higher-paying banking jobs (loan officers, operations managers, presidents, etc. – tellers are already paid Wal-Mart-like salaries). Their ATM network will be bigger than yours. Eventually, many branches near Wal-Marts will close.
This outcome is inevitable. The Utah Industrial Banking license, used by many other manufacturers, retailers and even financial services firms, will soon be granted to Wal-Mart as well. Politicians will rant, lobbyists will lobby, but eventually, Wal-Mart Bank will be a reality. After founding the bank, what is stopping Wal-Mart Asset Management from selling and managing mutual funds? There is certainly excess fees and poor performance to be rung out of that industry.
Is your bank or financials services firm prepared to compete with Wal-Mart? The smart ones are. The others will be road kill under the Wal-Mart steamroller.
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