Wal-Mart is no Bank of America

Everyone hates the Big 4, but new banking efforts by retailers will only act as R&D for the financial giants.

By TheStreet Staff Oct 9, 2012 12:59PM

TheStreet logoPerson withdrawing cash copyright Image Source, Image Source, Getty ImagesBy Dan Freed


The U.S. banking quadropoly of Bank of America (BAC), Citigroup (C), Wells Fargo (WFC) and JPMorgan Chase (JPM) has worn out its welcome with the public, but don't look for Amazon (AMZN), Google (GOOG) or even Wal-Mart (WMT) to offer a meaningful alternative.


Wal-Mart has long aspired to enter the banking business. While pre-crisis efforts by the retailer were shot down, Wal-Mart is back at it through a partnership with American Express (AXP) unveiled Monday called Bluebird.


While Rochdale Securities analyst Dick Bove argued in a note Monday that Bluebird does pose a threat to the established banks, it's hard to see Wal-Mart and Amex really offering a viable alternative to consumers.


While the partnership clearly wants to pitch itself as a white knight, arguing in a statement that it is "expensive to be poor," and that Bluebird "rights many of the wrongs that plague the market today," who do they think they are kidding?

If Occupy Wall Street couldn't get people who hate big banks to switch to smaller ones -- even sympathetic people like me -- why should Wal-Mart or American Express be any different? The power of inertia is far too great, and it is aided by the fact that all the automatic deposit and billpay customers set up through their banks are extremely costly and time consuming to undo.


Amazon and Google, meanwhile, don't look to be trying to compete with banks at this point, even though they are entering the lending business to spur sales of existing products.


Rochdale's Bove points to private label credit cards by companies such as Home Depot (HD) and Sears Holdings Corp. (SHLD) to argue these efforts to boost sales by extending credit always end badly.


But not all private label credit card businesses have failed. Alliance Data Systems (ADS) has had success with its private label business, and General Electric (GE), which initially wanted to sell the business, now finds it to be one of the most profitable GE has.


What's more, Google and Amazon are offering credit to small businesses, not consumers. That ought to allow them to be more selective, since the supply of credit to small business is especially tight. Nonetheless, these efforts are modest in scope and so don't pose a threat to the big banks.


In fact, the same could be said of Wal-Mart. Getting around banking regulation proved so easy in the run-up to the 2008 crisis, many assume the next crisis will come from a similar exploitation of loopholes in the rules. Building a bank in secret, however, isn't likely to prove so easy for several years at the very least. That is especially the case if you are a giant like Amazon, Google or Wal-Mart. Regulators have broader powers that they did before the crisis, and they are likely to intervene before any new shadow banks get too big.


What Amazon, Google and Wal-Mart are more likely to accomplish is to give more nimble banking players like Wells Fargo some smart ideas they will then be able to properly exploit.



More from TheStreet.com

Oct 9, 2012 2:22PM
Something has to be done with these very large banks. I don't think this is the way.
Oct 9, 2012 3:47PM
Even this writer talks about how banks look for loopholes to continue ripping us off. Institutions which we used to respect like banks, universities and hospitals are all about profit. They no longer respect their customers.
Oct 9, 2012 3:44PM
Eh, why not bank at Wal-Mart? They CAN'T do any worse than Obama bailouts Bank of America, Citigroup or JPMorgan Chase!
Wal-Mart has a reasonable shot of pulling this off because their stores are everywhere, most of us like to use a bank that is convenient to get to and has locations in multiple cities. Who has more outlets than Wal-Mart?
Oct 9, 2012 4:54PM
: Are you clueless?? Oboma has spent more money than the last four presidents before him. As long as he is in office we will never get out of debit. Let alone that this man is trying to up relations with China. Really what an idit. If you visit Japan, they are at the point if we lay down with China they will part ways. 
Oct 9, 2012 3:45PM
Wake up, don't u see what happening, the big banks (and now retailers see it) are taken the cash out of your hands, having all the control of all money. Why would u want to pay to use your own money that u work so hard for. Banks are trying to make cash a thing of the past. When they push there credit cards and push the pre=pay credit c
Oct 10, 2012 8:42AM

Romney ' WHERE'S THE BEEF' to your 5 point economic plan, all fake.

Romney the numbers don't add up. 8 Trillion means BIG tax increases for middle income.

Romney "47% of the people, I'm not interested in them their victims."

Romney Bain mgt style was corp raider not empathic at all to people.

Romney State run healthcare isn't balanced and fair it's a circus.

Romney Mass. came in 47 of 50 states for job creation, when you were gov'r

Romney "let GM go bankrupt", isn't a plan it's a Bain corp raider tactic

Romney immigrants "let them self deport" ...

Romney "women have there place"....

Romney is King.....of 'FLIP FLOPPERS' is the only reality here.....

Oct 9, 2012 2:49PM

Walmart an the stock mkt will nose dive after Romney is elected.


His job one is to build a 'WAR MACHINE'- 2 Trillion $$$ more in your taxes above present military baseline. The present military leaders don't want it but he wants to invade Syria, Iran and back off the Russians as he says ie restart the cold war(?). He is a War Hawk like G.W. He will send your kids to war to died but not his. He like G.W. made sure neither he nor his kids went to war. Ours (the poor and middle income families ) will supply the kids again and again for his ego.

Oct 9, 2012 2:44PM
you shop at a white trash store this is what you get
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