Is It Time To Let Walmart Into U.S. Banking After All?

Walmart (NYSE:WMT) has been blocked from owning a U.S. bank, but the retail giant is continuing its push into financial services by tying up with a non-bank lender catering to Hispanics called Progress Financial, according to Bloomberg.

Progress isn't a bank either, so it's not allowed to take deposits. The company makes high-interest loans using money from hedge funds, putting the loans on debit-card-like "purchase cards" that can be used at retailers. Walmart's connection: It accepts the cards for purchases at its stores, a Walmart director sits on the Progress board, and the Walton family's venture-capital firm is Progress's largest investor.

Given that Walmart is the strongest force behind MCX in its challenge to Visa and MasterCard, and that the chain is heavily into "shadow banking" with prepaid debit cards and mortgages, it's no surprise that conventional banks are still fighting to keep Walmart from having its own bank—after all, who wants to compete with Walmart? In December, a key group of bankers who advise the Federal Reserve even pushed the Fed to do more to block shadow banking—and a main focus was clearly Walmart.

The problem for bankers is that other U.S. retailers already own banks—Nordstrom (NYSE:JWN), for example—and Walmart already owns banks in other countries, including Canada and Mexico. Other chains, such as Costco (NASDAQ:COST), have partnered with lenders for mortgages. Several others are in the payment-card chain offering processing services for small businesses.

And while Walmart is officially blocked from accepting deposits, it's hard to look at prepaid debit cards as anything other than a deposit account with no interest and a fee structure that's even worse than most commercial banks.

That hodgepodge of almost-banking is likely to continue as long as bankers block most retailers from official, regulated banking. But if they don't, retailers—particularly Walmart—will keep finding ways around that.

For more:

- See this Bloomberg story

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