MADISON, Wis. (10/25/10)--Filene Research Institute’s latest report maps out the shape of Walmart’s retail financial services footprint in the U.S. and Mexico, going on to suggest that the world’s largest retailer has much more in store. The Blended Walmart Business Model
, by Filene Research Fellow Robert Manning, knits together the many angles of Walmart’s involvement in banking services: from its 2007 charter travails to its foray into Mexican banking and to its long-term strategy of providing financial services--with or without a formal bank charter. In the report, Manning studies Walmart’s claims of low-price leadership in financial services and its retuned approach of offering financial products through partnerships in the U.S. and through an independent charter in Mexico. Highlights from the report include:
* Walmart still wants a bank charter. The potential from finance and penalty fees combined with interchange fee savings’ could easily garner more than $1.3 billion annually from Walmart’s payment card system and portfolio of customer credit card balances. * Walmart already offers a compelling range of benefits to potential banking customers: convenient locations and hours, welcoming atmosphere, familiar customer service, straightforward fees and fast transactions. * Walmart is targeting finance because it pays. The profit margins of Walmart’s traditional retail sales average 23.7% gross and 3.5% net, whereas the averages for comparable financial services companies range from 14% to 38% gross and 6% to 9% net.
Manning makes a case that Walmart’s plan is advancing even without a U.S. bank charter. Today, the retailer mainly offers ancillary financial products, but it may soon operate in the more traditional business model of deposits and loans, said Filene.