Stymied in its attempts to obtain a banking licence at
home by fierce opposition from traditional banks and credit unions,
US retailing behemoth Wal-Mart is looking further afield, with
plans to expand into markets currently with little or no non-bank
competition. Charles Davis reports.
Go deeper with GlobalData
The US retail banking industry
continues to eye warily the banking aspirations of Wal-Mart, as the
country’s largest retailer continues to expand its brick-and-mortar
Walmart MoneyCenter network throughout its sprawling franchise.
Given Walmart’s size and strength,
it doesn’t come as much of a shock to see just how big its current
banking operation is and how ambitious its plans for growth are –
in both the United States and also around the world.
Wal-Mart has tried in vain for
several years to obtain a US banking licence, most recently in
2007, when the retailer withdrew an application in Utah for an
industrial-bank charter that would have allowed it to lend money
and back deposits with a government guarantee. That plan fell
victim to an intense lobbying effort by bank and credit union
opponents, concerned that the charter could lead to Wal-Mart
becoming a retail banking giant with an inordinate amount of
control over the market.
Undaunted, in March this year,
Walmart announced the opening of its 1,000th Walmart MoneyCenter
and announced plans to add centres in 500 additional stores this
year.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“Walmart MoneyCenters are a
cornerstone of our business and were specially created to give
customers a welcoming environment where they can save when they
cash cheques, pay bills and transfer money,” said Jane Thompson,
president of Walmart Financial Services.
“Customers ask when their stores
will get a Walmart MoneyCenter, so we are delighted to announce the
expansion into approximately 500 more stores.”
Walmart
MoneyCenters are mini-branches located inside stores that handle a
wide variety of daily financial transactions, from check cashing to
prepaid cards and remittances. With the anticipated expansion this
year, there will be Walmart MoneyCenters in approximately 40% of
Walmart’s 3,763 stores nationwide.
The centres cater to millions of
the retailer’s lower-income customers who don’t have significant
relationships with a bank. The federal government estimates the
category accounts for one in four of US households.
The fees Walmart charges – $3 for
cheque cashing, 88 cents for most bill payment services and $3 for
a prepaid Visa-branded Walmart Moneycard – are far less than the
retailer’s competitors.
The company currently conducts 3m
to 5m financial transactions a week at its US centres. Because it
does not have a banking licence, Wal-Mart can’t lend money and back
deposits with a government guarantee, but the retailer has no plans
to reapply.
To address the lending side of the
business, Walmart works in the US with General Electric’s banking
unit, which issues the Wal-Mart debit card. Green Dot processes
customers’ debit transactions.
Instead, the retailer is moving
aggressively into international markets, signaling its intention to
become a player in markets currently facing little or no non-bank
competition.
Harbinger of things to
come
Mexico could be a harbinger of
things to come in other markets. Walmart de Mexico SAB has quickly
become the nation’s largest retailer, and the company recently
announced plans to invest MXN12.5bn ($975m) in its domestic
operations, including the opening of 300 new stores.
The company’s retail banking unit,
Banco Walmart, or Walmex, plans to open 168 branches in different
Mexican cities this year, an increase of 88% compared to 2008. In
Mexico, Walmart has managed to avoid the lobbying blitz that met
its plans to formally enter retail banking, and as a result, its
banking operation is flourishing. It also has applied for a
Canadian bank charter.
Earlier in March, Walmart de Mexico
SAB closed the acquisition of Wal-Mart Centroamerica from its
parent company Wal-Mart and local investors in a stock and cash
deal. The deal added 519 stores in five countries – Guatemala, El
Salvador, Honduras, Nicaragua and Costa Rica – with sales of $3.3bn
to the Mexican unit’s existing network of 1,478 stores.
Walmart has access to about 140m
potential customers in Mexico and Central America, company
officials said. The company plans to open 30 new stores this year
in Central America, including 26 discount retail outlets, offering
a new launching pad for financial services offerings in the
process.
In fact, Walmex’s plan to grow 50%
faster than the market and gain market share from both formal and
informal markets appears to be on track. Walmex fourth-quarter
sales increased 10.4% over last year while comparable store sales
grew 3.8%.
Walmart International president and
CEO Doug McMillon told delegates at Walmart’s fourth-quarter
conference that growth prospects in markets in China and Brazil
“give us confidence that we can build on the momentum we have
experienced during the last several years”.
“We are really pleased with our
start-up operations in India and see substantial opportunity there
as well,” McMillon added.
Walmart’s international business
grew 11.9% on a constant currency basis in the fourth quarter of
2009. International net sales for the fourth quarter were $29.6bn,
an increase of 19.5% from 2008.
In the United Kingdom, Wal-Mart’s
Asda chain opened 13 new stores in fiscal 2010 and relocated
another two to larger locations. Wal-Mart now operates 84
supercentres in Canada exceeding the company’s stated target of 83
for fiscal year 2010. Rapid growth continued in China, with 14 new
stores opened in the fourth quarter bringing the total China store
count to 279.
As its margins tighten domestically, Walmart’s global pace will
only quicken. As an emerging retail financial services brand, no
bank on earth can say with certainty they won’t be competing
against them soon.
