Walmart Dances Around Banking Sector

Wal-Mart bank may not be far off

   

Walmart Dances Around Banking Sector

Walmart Stores Inc. (NYSE: WMT) was previously denied access to having its own national bank subsidiary.  It seems that this move by the retail giant could have bashed countless numbers of community banks by having the ability to set up its own bank in the thousands of stores nationwide.

Imagine if the community bank sector took the same hit that many mom and pop stores in communities faced as Walmart took the consumer spending sector by storm.  Some recent efforts may have Wal-Mart getting in the backdoor of where it had previously been denied access.

Today’s IPO debut of Green Dot Corporation (NASDAQ: GDOT) is one such indirect effort.  Walmart took a small but potentially significant stake in Green Dot, which offers prepaid financial services in a long-term deal through Walmart stores.  This new card-services company has provided the prepaid debit card of Walmart’s MoneyCard since 2007.  Green Dot recently moved to buy a Utah-based bank.

The Green dot tie-in might not be a true banking purchase, but the company does give Walmart an opportunity to test the waters when it comes to cashing in on those consumers who can’t or won’t put their money in traditional banks.  There are millions of Americans who have been wiped out on the digital monitoring under the ‘official’ financial system.

Another recent initiative is another banking effort, although it may feel more like a challenge to CIT (NYSE: CIT) on a very small basis rather than to the Main Street banking sector of America.  Walmart’s recently started an initiative that would lend $5,000-$25,000 to its small-business members who qualify.

Community banks are likely not to lose out in any single instance here by this move from Walmart’s.  If they are denying loans to small business owners, which many are, and if they are not catering to the bankless population already, then it seems a no-harm issue on the surface.  What happens in the years down the road as at least a portion of these millions of Americans get back on their feet is another issue.

The Bank of Walmart does not officially exist yet.  However, it does seem in some form that a building-less Walmart bank is starting to take shape.

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Article printed from InvestorPlace Media, http://investorplace.com/2010/07/walmart-banking-green-dot/.

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