Is Walmart Positioned for Banking?

Bloomberg Businessweek March 6, 2021 pp29-30 |Finance|”What If Walmart Was Your Bank?” “The retail giant just poached two Goldman Sachs execs. Wall Street is getting nervous”. “THE BOTTOM LINE” “A decision by the FDIC last year could make it easier for retailers to get into the banking business, but Walmart faced bad publicity the last time it tried.”

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Summary of the article

When you look at the number of locations and the frequency of customer visits it’s easy to understand why traditional banks might worry about Walmart getting on their turf. Wells Fargo has 5,413 locations, Walmart 5,342, JP MorganChase 4,980, Bank of America 4,254 and so on. Further, Walmart has an installed base of 150 million customers, is open 24/7 and “MScience estimates the average person went to Walmart’s stores or websites about 30 times a year.”

Recently Walmart CEO, Doug McMillon, has working with Ribbit Capital-famous for FINTECH, brought on two senior bankers from Goldman Sachs to “run a financial technology venture.” As of yet details aren’t forthcoming. Such a move comes after the FDIC, Federal Deposit Insurance Corporation, recently “formalized rules…[allowing] nonfinancial businesses to set up so-called industrial loan companies.” Traditional banks believe this crosses the long-held line between commerce and banking. Banksd argue as well that the new rules favors nonfinancial firms as they won’t be bound by the same capital and liquidity measures required by traditional banks.

Such a move by Walmart would expand on services already provided by its MoneyCenter locations where customers “cash checks, receive tax preparation services,” can acquire credit cards and prepaid debit cards as offered through Walmart’s partnerships with banks. “Whatever the retailer’s intentions, the banking industry is on high alert.”