A look At Walmart's Retail and Banking Empire

compiled by Kevin Surbaugh


We know of Walmart and its numerous retail locations with over 4,300 stores in the United States alone (It has another 4,000 stores in 15 other countries around the world, including Canada and Mexico.).  But did you also know they are a banking institution also?  In fact at least three times they have tried to enter the banking market in the United States, but have been denied.  However, they got a banking license in Mexico and opened their first bank there in 2007. Now a little over four years later they have over 1 million customers, a fact celebrated in a press release earlier this year. “It is an honor for us to celebrate Banco Walmart’s first million customers,” said Carlos Cárdenas, vice president of MasterCard products for Mexico and Central America, said in March of 2011. “This important accomplishment has been possible thanks to a very sound relationship and undoubtedly represents the beginning of much success together. Our business alliance will benefit even more customers through efficient and safe electronic-payment solutions such as credit and debit cards.”

Banco Walmart has more than 263 branches in 31 cities throughout nine states in the country: Greater Mexico City, State of Mexico, Puebla, Jalisco, Morelos, Guanajuato, Hidalgo, Michoacán and Querétaro. An additional 1,571 in-store cashiers at Bodega Aurrerá, Walmart, Superama, Sam’s Club, Suburbia, VIPs and El Portón allow customers to pay their utilities, make withdrawals, deposits and check their balances
- a Walmart press release

Then in 2009 Walmart's Canadian operation incorporated as Walmart Canada Bank and last year on June 15, 2010, Wal-Mart officially launched into the banking sector under the name Wal-Mart Canada Bank. At this time though they only offer a Masterard credit card product in Canada. I certainly wouldn't be surprised within the next year or two if they start opening branches in Canada to, but for now it is just the Mastercard.

When we say they offer a Mastercard, we are talking them themselves. Unlike here in the USA where they have to team up with another bank, like GE Capital or Citibank, etc to offer such products. In Canada since they have a banking license there they don't need to team up with a bank, because they are the bank. 

Don't think they have forgotten the United States though. They still want a bank here, but since they have been met with such regulatory resistance, they have enhanced their financial offerings that don't require a banking license.

For example they have Money Centers in a growing number of their stores in which customers can for a fee pay bills and cash checks.  They also have a prepaid re-loadable debit card which is offered through GeenDot. A company they have invested since invested in, making them part owner of them. Even in the companies Sam's Club's which offers small business loans to its members. The loans are really through Superior Financial Group.
  Officially Walrmart says it has no plns to enter the banking market in the United States. Still with three attempts, one can't really believe that.  It is obvious that they want to open a bank here. 

So if Wal-Mart insists that it's not encroaching on retail banks' traditional turf, why are bankers and regulators putting up blockades? The company certainly isn't the first retailer to enter the financial services sector. Merchants have been offering credit ever since the 1800s, when general stores allowed customers to delay paying for purchases by putting them on an in-store account.
But retailers' financial services really took off when Sears, Roebuck & Company set up Allstate Insurance in 1931, and in 1953 introduced its first credit card. In the early 1980s, Sears acquired the brokerage house Dean Witter Reynolds and launched its no-fee Discover credit card. But in the 1990s, Sears sold most of its finance-related holdings after shareholders complained that they were detracting from the retailer's core business. Fast forward to today, however, and Sears is testing new financial centers -- similar to Wal-Mart's Money Centers -- in a handful of its Kmart stores around Chicago.
While other retailers, such as Home Depot, have also unsuccessfully applied for bank charters in recent years, experts say Wal-Mart's size is what worries banks the most. As the world's largest retailer, the company's 2009 group revenue of $405 billion was about 1.9% of U.S. GDP; in comparison, sales at Sears were $1 billion when the chain was pioneering retailer-based financial services in 1945, or about 0.4% of GDP. Combined revenue for Sears and Kmart at the beginning of 2010 was more than $44 billion. Today, there are twice as many Walmart stores than Sears and Kmart stores combined in the United States, and Walmart stores offer a wider selection of goods and services than any other retailer. "The bigness of Wal-Mart is a big subject," Lichtenstein notes. "Wal-Mart is much larger than Sears in order of magnitude, and larger than any retailer today or 40 years ago in terms of its entire economic clout."

- Strategic Management

Continue watching, Walmart really does want to be in banking as well as retail. Despite what they say publicly. Actions after all is louder then words. Will they be the antichrist foretold in the Bible, or they be like Sears and eventually spin off their financial holdings (H&R Block, Allstate,Discover card, etc). Of course Sears has sense been sold to Kmart who then took on the corporate name of Sears Holdings.



disclaimer: Kevin holds a smaller investment that includes Walmart (WMT) stock. Currently he has nold holdings in sears (SHLD).

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