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| No | 65% | 220 votes | Total: 341 votes | |
| Yes | 35% | 121 votes |
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The answer depends widely on the perspective you take. Taking on a corporate view the answer tends to be yes, Wal-Mart should get involved in banking. They would not be the first ones. Industrial giants such as General Electric and most car producers exploited their mere size and frequent client contacts to generate profits by adding a financial arm to their core business. Wal-Mart certainly has the size and the market position do so as well and could easily win over costumers distrusting traditional banks. Having said this, I will show that stronger arguments against an involvement of Wal-Mart in banking exist both from a corporate point of view and in particular taking a broader look at the whole economy.
The world has learned again, they painful way, how risky and volatile the banking business is. To mention a prominent case, the troubles of its financial arm have cost General Electric its long held triple-A rating. It demonstrates that problems in a finance subsidiary can easily spill over to the core business and endanger the vitality of the company as a whole. For this reason stock market participants are quite critical when it comes to being exposed to any kind of credit risk and their reaction may well mitigate the positive effects mentioned before via a decreased valuation at the stock markets. In general, diversification can decrease the volatility of a company's earnings, but it is questionable if this holds for diversifying into the banking industry.
Moreover, Wal-Mart employs more then two million people and is the biggest private employer in the world. The business it does is stable and profitable and involves a limited amount of risk. It even profits from a recession and provides a resort for many less educated who are often let go first when times get rough. The economy is endangered enough by the mere existence of the modern, highly sophisticated, and interconnected banking system. It is not necessary that companies with little expertise enter the business as it is hard enough to control the existing institutions. Wal-Mart could be tempted to commit similar mistakes as other actors did before and take on too much risk. It also might be harder for regulators to clearly distinguish between the financial arm and traditional retailing. And the consequences of a failure of Wal-Mart may be much more dire than the job losses in the automobile industry. It is just not reasonable to take on such risk without any need.
To emphasize the main point, it does not make sense for every strong actor to enter the financial business even though he could. This secures both his own future and makes the economy as a whole less risky. A famous saying tells us a cobbler should stick to his last. That is exactly the advice that can be given to Wal-Mart as well.
Learn more about this author, Emanuel Josef.
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Yes
America has been the biggest proponent of free trade practices. It despises government control in business and professes the capitalist way of doing business. Yet, in this country there is tremendous apathy towards Wal-Mart getting involved in banking.
Wal-Mart has changed the way Americans shop, and for the better. It started much after many of its well known competitors and has given them a run for their money. Much though people badmouth it on various grounds like unfair trade practices, bad employee policies and law breaking, the fact remains that nobody can wish Wal-Mart away. While it may be true that all that the retail giant does is not above board but for that there are appropriate government agencies to check frauds and unfair trade practices. Let us accept it, Wal-Mart works smart!
People often say that Wal-Mart should not be allowed into banking as they will introduce unfair trade practices. This essentially stems from the fear that if Wal-Mart gets into banking then it will turn banking into a competitive match and drive down profits for other banking players. There is a fear of takeovers and acquisition. With the deep pockets of Wal-Mart, it can easily digest several of the existing banks.
It is natural for a company to diversify into associated business. After all this is what business is. Grow, profit, prosper! Make a success of a line of business and then grow in allied lines. Wal-Mart already has existing relation with a large segment of the American population. Wal-Mart with its huge customer base will only behave more responsibly if it is allowed to get into banking. For it has greater things to lose if it does not follow proper business norms.
Frankly speaking, if you look at the banking industry you will realize that it requires immediate reorganization. There are numerous small banks spread all over America. Hardly a handful of them are true national players with branches spread across the country. If a person has an account with one of the smaller banks and if he or she relocates to another part of the country then most likely an account will have to be opened with another local bank. Otherwise one has to pay ATM fees to withdraw money from another bank's ATM. Is this justified? Wouldn't it be better if it is made mandatory for banks to operate in atleast 25-30 states before they are given license? This means banks would require more capital but this would also mean greater accessibility to customers.
Unfortunat ely, a group of politicians and business groups have ganged up against Wal-Mart. They fear that with the entry of the giant they will not be able to continue their profitable business at the expense of customers. Banking is a big contributer to election funds and campaign funds. So there is an ulterior motive of vested interests behind Walmart not being allowed into the business. But it is not in the best interest of banking.
There is nothing wrong if Wal-Mart getting into banking . Customers will be delighted as they will get products at more affordable prices. Infact loans will now be available at "Always Lower Rates". Who knows you might get a student loan for only 0.99% APR!
Learn more about this author, Saurabh Pal.
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