Why are banks so threatened by Wal-Mart?

by Erin McCune on March 16, 2007

in Banking

Today Wal-Mart dropped its bid to operate its own bank  in the face of intense opposition from the banking industry and only days before bankers were scheduled to testify before a Congressional committee on a law banning non-financial institutions from operating banks. (See Wal-Mart and FDIC statements here and coverage in The New York Times and Wall Street Journal)

The Javelin Strategy & Research blog asks why banks are so threatened by Wal-Mart and postulates a likely answer:

Why is everyone picking on Wal-Mart?

… There is a large portion of consumers that already utilize the limited financial services, including check cashing, money transfers, credit cards and bill payments, offered by Wal-Mart. The potential for this population group to use additional services offered by Wal-Mart is high. Established banking institutions, national banks, credit unions and community banks are making strides and reaching out to the “underbanked” population in the hopes of building trust in this population group and growing their consumer base. Is the reaction to potential direct competition from Wal-Mart in this market segment, telling us that established banking institutions are worried that they can not successfully change the opinions and images held by this market segment about the traditional banking community?

Why is everyone picking on Wal-Mart?
Post at the Javelin blog.

Wal-Mart Drops Bid to Operate Its Own Bank
The New York Times
Published: March 16, 2007

Wal-Mart Drops Plans To Enter Banking Business
The Wall Street Journal
March 16, 2007 4:19 p.m.

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