Wal-Mart Promises To Limit Banking To Payment Acceptance

Copies of the testimony provided at the hearing are available online on the FDIC's web site.

In her testimony yesterday, Jane J. Thompson of Wal-Mart Financial Services made several points that focused on Wal-Mart's goal for the bank to facilitate electronic payment transactions and thereby lower the cost of payment acceptance for Wal-Mart:

The purpose of the proposed Wal-Mart Bank would be to sponsor credit card, debit card and electronic check transactions – nothing more.

The proposed Wal-Mart Bank would serve as the legally required bank “sponsor” so that Wal-Mart can submit payments to the payments systems, but the bank would not have computers and systems to perform the actual processing of payments. The payment system involves sending electronic checks, debit and credit card payments by Wal-Mart customers to the customer’s bank and subsequently returning payment funds to Wal-Mart. We are single-mindedly seeking an Industrial Bank in order to provide greater efficiency, effectiveness and safety in Wal-Mart’s interaction with the payment system.

By receiving sponsorship fees that Wal-Mart pays to third party banks today, the bank would directly serve Wal-Mart’s core mission of everyday low prices for our customers – a mission that has improved the standard of living of millions and millions of Americans.

With this proposed bank, Wal-Mart is committed to reducing the risk to the payment system.

By sponsoring the highly predictable and low-risk payment transactions of Wal-Mart Stores, Inc., the bank would have lower risk than other sponsor banks that serve a variety of businesses, including high risk entities. Further, the bank’s sole customer, Wal-Mart Stores, will have implemented the new Visa and MasterCard Payment Card Industry (PCI) standards for data security protection before the bank commences operations.

Editor's Note: Some in the payments industry have speculated on whether Visa and MasterCard might eventually open up their US membership to merchants directly - particularly to major merchants like Wal-Mart and perhaps by creating a special class of membership (acquiring only, no issuance allowed, for example). If the associations did so, Wal-Mart's pursuit of a bank charter to gain direct association membership would be totally unnecessary.