Banking Against Wal-Mart
This morning's Wall St. Journal has an editorial about Wal-Mart's request pending with the FDIC to enter the banking business. According to the editorial, the request is being opposed by bankers - in particular, the Independent Community Bankers Association.
To head off the mounting opposition from the bankers, Wal-Mart insists that in the short term it merely wants to create an in-house banking affiliate so it can lower costs on credit card transactions at its stores. Traditionally, banks charge an interchange fee of roughly 2% on the cost of the retail credit/debit card transaction. Wal-Mart has determined that if it owns its own bank it can cut the transaction fee in half, and pass the cost-savings on to its customers who pay with Visa or MasterCard.But why shouldn't Wal-Mart be permitted to engage in a whole range of banking services down the line, if it wishes to? That's the meaty policy issue at stake here: whether the traditional firewall between banks and commercial enterprises (i.e., the commercial lenders and the borrowers) should be officially torn down.
The FDIC's public file on Wal-Mart's application (which includes non-confidential portions of the application as well as public comments on it) is available online.
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