Fears regarding Walmart’s assumed takeover of world commerce have become something of a conversation staple, even entering the kids’ movie lexicon in 2008 when a fictional organization called “Buy n Large” was featured none too positively in Pixar’s satirical “Wall-E.”
But to what extent does Walmart’s business dominance allow it to be singled out by other industries as the subject of regulatory changes; especially sectors that have been largely unaffected by the effects of the Walmart’s affordable alternatives to just about everything?
This question took center stage last week when Bloomberg revealed that a group of bankers had formally appealed to the Federal Advisory Council in an effort to block Walmart from offering certain new financial services.
According to the report, member banks of this body – which include BB&T Corp. and PNC Financial Services – began sounding the alarm at a December 19 meeting, but the comments were only just obtained by the news outlet this May under the Freedom of Information Act.
The Case Against Walmart Bank
One of the main concerns about Walmart’s entrance into the financial services industry raised at the meeting was that, due to the non-financial nature of the company, it is subjected to less oversight: a charge that would seemingly accuse the company of a competitive advantage.
But the bankers went a step further, saying that Walmart is trying to use this to its advantage.
“Walmart has sought to enter banking formally for over a decade,” council members said in meeting minutes obtained by the source. “Faced with opposition, Walmart now appears to have entered banking through the back door, without the regulatory framework that applies to banks.”
Walmart began its attempt to offer financial services in 2005, when it made a short-lived bid to open a Utah-based bank, and for a while, the company was mostly quiet on this front. In 2012, however, Walmart teamed up with American Express to offer Bluebird, a prepaid offering for its customers, in a move that even Bloomberg says “has reordered the prepaid market.”
Is Walmart Being Singled Out?
As Bloomberg noted, “the bankers also portrayed Walmart as part of an emerging ‘shadow banking’ system,” making it easy to conclude that the company is being treated unfairly. But, Walmart certainly isn’t the only company to benefit from financial services that fall outside its main product offerings.
Starbucks, for instance, has leveraged its position as a daily stopping point for Americans into a prepaid cards phenomenon. Its success has prompted many to suggest that since customers add $3 billion (http://www.dailyfinance.com/2013/05/05/the-bank-of-starbucks/)to their Starbucks cards each year, it is now the leader in this business, with more of the market than the many small U.S. financial institutions.
Will Regulators Take Action?
Though Walmart appears to have been the subject of the discussion, it’s clear that the assembled parties at this meeting were worried about the state of the entire market.
The attendees went on to argue that companies that provide services like money transfers and prepaid cards are competitors with banks, and they appealed to regulators to “level the playing field,” the source says.
What the bankers say Walmart is really offering is a debit and checking alternative. And the solution, as they see it, is to label the company a “larger participant” in the market – allowing its operations in this sector greater oversight – and to expand the Dodd-Frank law to incorporate companies like Walmart.
For the time being, however, Walmart says it is operating within the law.
“The financial services products offered at Walmart stores are properly regulated,” Walmart spokesperson Deisha Barnett told the report.
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