Wal-Mart, the largest US retailer, is optimistic that it will get permission to open a state bank in Utah to handle credit card processing, in spite of an unprecedented wave of lobbying by opponents in the banking community.
Jane Thompson, president of the retailer’s financial services division, told the FT that she was “amazed at the stir that we’ve created”.
“It’s almost as if we’ve been the excuse to bring up every issue known to man about it,” she said of the application, which was filed in July.
An attempt by Wal-Mart to acquire an industrial bank in California in 2002 was blocked by a hostile state legislature. An initial attempt to enter the banking services sector was blocked by changes to federal banking law in 1999.
Wal-Mart says it wants to operate an industrial loan corporation (ILC) in Utah to reduce the costs of access to credit and debit payment processing networks. The application, said Wal-Mart did not mean it intended to open branches outside Utah – one of the concerns of opponents who fear that the retailer could eventually establish a national banking network.
Ms Thompson has repeatedly asserted that the retailer was focused on a strategy of encouraging local banks to open branches at its stores.
The application requires the approval of the Federal Deposit Insurance Corporation as well as Utah’s state regulators. Last month, the FDIC said it had received a record number of public comments on the application, many from small, independent, community banks.
Two members of the House of Representatives have called on the FDIC to hold public hearings over the application. Jim Leach, a Republican former head of the house financial services committee, has filed a bill that would prevent commercial entities from owning state industrial banks.
This bill may be attached as an amendment to banking services legislation currently before Congress.
Target, Wal-Mart’s main competitor, operates a Utah ILC, as do several US and international car companies.
Ms Thompson said Wal-Mart believed the existing operation of ILCs by other commercial companies in Utah had demonstrated no risk to the banking system. ILCs are not subject to supervision by the Federal Reserve.
“We look at it that [these] issues [have] been debated and resolved. All these commercial entities own one. That cat is out of the bag,” she said. “We still think this is legal. It’s what these banks were set up to do. We still don’t see why we shouldn’t have one if our number one competitor, Target, has one.”