Anticipating an extensive and controversial approval process, the world’s biggest retailer, Wal-Mart Stores decided to withdraw its application to enter the banking industry. Thwarted by a phalanx of opponents from big banks to unions and intrigued by conflicting messages about its intentions, Wal-Mart abandoned its ambition saying it would find other ways to serve customers’ financial needs. The company was pursuing to open an industrial bank in Utah, which would have allowed the company to process credit card transactions internally.
However, the company, the world’s leading retailer, has expressed that it was not pulling back from strategy to launch a stream of new financial products, which would include mortgages and other types of consumer loans. The retailer giant has abruptly dumped those plans for its own bank after a spate of criticism from lawmakers, banking industry officials and watchdog groups. It had filed an application to obtain a special banking charter.
The company officially said that it made the decision because an attempt by federal regulators to delay a moratorium on new applications for the kind of bank it wanted to start, known as an industrial loan corporations (ILC), would mean approval of its request would take years against a few months as initially expected. Critics of the retailing giant’s plans argued that Wal-Mart run bank could upset the U.S. banking industry, fearing it would challenge established rules that split commerce from banking and raise serious regulatory issues.
Notwithstanding Wal-Mart’s repeated declarations, the banking industry had opposed the retailer’s plans following fears that it would use its ILC status to push into retail banking. On the other hand, community bankers were apprehensive that Wal-Mart would have an advantage with in store advertising and promotions.
