Wal-Mart Withdraws Banking Application – And We All Lose
George Boelcke CCP
March 29, 2007
Wal-Mart this month dropped another attempt to apply for a banking license because of significant objections. Most of these came (and will continue to come) from consumer groups, other retailers and banks. This was an application for a so-called industrial loan application, which is only a limited-purpose bank to allow the processing of credit cards and other payments.
Almost all of us learned early in our childhood that, when we get picked on, it’s great to be buddies with one of the big kids in school to be able to protect us to some degree. Well, the big kid in the retail world is Wal-Mart, hands down. The kid being picked on is us, the consumer.
Oh sure, it’s indirectly through higher prices, fees and charges, but it’s a no-brainer that any costs of retailers usually get passed down to you and me. And some of the biggest costs are the three different fees charged by credit card companies to retailers every time someone they accept payment by credit card, averaging around 2.1 percent. With the majority of people paying by credit card, these costs are staggering. And while we don’t see them detailed on our bill, they’re certainly included in the markup merchants charge for their products.
In the area of financial services, Wal-Mart has a proven track record of helping their average client. Three years ago, the company started offering money orders and money transfers through their in-store financial services, which also includes payroll and government check cashing.
Before Wal-Mart entered this field (and now does more than a million financial transactions a week), the average cost of a money order and money transfer was staggering. Since then, these service charges have dropped like a rock. Who benefited? The typical lower income Wal-Mart customer and tons of immigrants who regularly send money back to their home country, and who now pay less than $9.50 – a huge drop from just a few years ago, and still almost 40% cheaper than Wal-Mart’s closest competitor.
And where else you can get a money order for around 40 cents? Have you asked the price at a bank lately? But then, who cares? At minimum, it’s the 30 to 40 million Americans who don’t even have a bank account. They’ve long realized that they’re better off with a money order and one fee than a bank account with layers of service charges and the possibility of one or more overdraft charges.
Or in the words of James Scurlock, the producer of Maxed-Out: “Fees cost the bank nothing! So, to Wal-Mart, I say, “bring it on!” Pointing out they’ve never charged a processing fee to scan any purchase and you can even use their bathroom. This being two great references to customer service and some much needed competition.
The main goal in retailing is to be able to offer lower prices through higher volume. The latter part of that is what financial institutions have and want to maintain – just not the former. Because, to financial institutions, lower prices don’t come voluntarily – they only come through competition. And if the pricing of service charges and fees were fair (perceived or for real), nobody would be looking to the big kid for help.
But then:
Aren’t the majority of special interest groups objecting to this, the same ones who have something to lose in the fees and charges they now collect?
Why are large retailers such as Target allowed to hold a banking license and not Wal-Mart?
If the Wal-Mart competition only results in a small price drop, why doesn’t anyone multiply that by million and millions of transactions and admit that this decision could save consumers literally hundreds of millions of dollars?
What if the more than 100 million people who visit a Wal-Mart store in the average week made a call to their elected representatives?
Almost all of us learned early in our childhood that, when we get picked on, it’s great to be buddies with one of the big kids in school to be able to protect us to some degree. Well, the big kid in the retail world is Wal-Mart, hands down. The kid being picked on is us, the consumer.
Oh sure, it’s indirectly through higher prices, fees and charges, but it’s a no-brainer that any costs of retailers usually get passed down to you and me. And some of the biggest costs are the three different fees charged by credit card companies to retailers every time someone they accept payment by credit card, averaging around 2.1 percent. With the majority of people paying by credit card, these costs are staggering. And while we don’t see them detailed on our bill, they’re certainly included in the markup merchants charge for their products.
In the area of financial services, Wal-Mart has a proven track record of helping their average client. Three years ago, the company started offering money orders and money transfers through their in-store financial services, which also includes payroll and government check cashing.
Before Wal-Mart entered this field (and now does more than a million financial transactions a week), the average cost of a money order and money transfer was staggering. Since then, these service charges have dropped like a rock. Who benefited? The typical lower income Wal-Mart customer and tons of immigrants who regularly send money back to their home country, and who now pay less than $9.50 – a huge drop from just a few years ago, and still almost 40% cheaper than Wal-Mart’s closest competitor.
And where else you can get a money order for around 40 cents? Have you asked the price at a bank lately? But then, who cares? At minimum, it’s the 30 to 40 million Americans who don’t even have a bank account. They’ve long realized that they’re better off with a money order and one fee than a bank account with layers of service charges and the possibility of one or more overdraft charges.
Or in the words of James Scurlock, the producer of Maxed-Out: “Fees cost the bank nothing! So, to Wal-Mart, I say, “bring it on!” Pointing out they’ve never charged a processing fee to scan any purchase and you can even use their bathroom. This being two great references to customer service and some much needed competition.
The main goal in retailing is to be able to offer lower prices through higher volume. The latter part of that is what financial institutions have and want to maintain – just not the former. Because, to financial institutions, lower prices don’t come voluntarily – they only come through competition. And if the pricing of service charges and fees were fair (perceived or for real), nobody would be looking to the big kid for help.
But then:
Aren’t the majority of special interest groups objecting to this, the same ones who have something to lose in the fees and charges they now collect?
Why are large retailers such as Target allowed to hold a banking license and not Wal-Mart?
If the Wal-Mart competition only results in a small price drop, why doesn’t anyone multiply that by million and millions of transactions and admit that this decision could save consumers literally hundreds of millions of dollars?
What if the more than 100 million people who visit a Wal-Mart store in the average week made a call to their elected representatives?
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