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Wal-Mart is already involved in banking. Sure, its application to open a bank that offers the full range of services is on hold for a year due to lobbying from the banking association, however, it already offers cheque cashing, money transfers, and pre-paid Visa debit cards to its members. These are profitable lines of business for Wal-Mart and are desired services by its customers, so where is the harm done?

The reason why the American Banking Association (ABA) has spent so much time and effort in blocking Wal-Mart's application is due to fear that with Wal-Mart entering the banking industry that profits for the existing banks will decline. Again, where is the harm done, when a company with a low mark-up reputation enters a new line of business and offers the lowest price in the industry?

There are millions of Wal-Mart customers in America without a checking or savings account. Given that Wal-Mart's target market is people who shop on price, isn't Wal-Mart one of the best positioned companies to offer such services to people who are already likely part of its existing customer base?

There could even be a synergy effect that would result in even lower prices for Wal-Mart's customers. Currently, Wal-Mart pays a banking entity to do its banking. Therefore, Wal-Mart makes its profits off of its merchandise and services. If Wal-Mart is permitted to be a full service bank that offers mortgages and loans, then not only does Wal-Mart get profit out of the item that it sold, but also makes additional profit from the financing. This provides an opportunity for Wal-Mart to lower its profit on each item sold by lowering the retail selling price, yet be more profitable overall.

For example, say Wal-Mart sells a pair of shoes for $10, and that $3 of the $10 is profit. If Wal-Mart is also a bank, then what it can do is lower the price of the shoes to $9. As a result, its profit for the pair of shoes is reduced to $2. However, because of financing the purchaser's loan, or line-of-credit, or credit card, let's say that Wal-Mart makes a $1 profit. That way, when Wal-Mart is also a bank, it earns $2 profit from the sale, and $1 from the financing, so it has $3 total profit. "But wait", you say, "your example is only breaking-even. Wal-Mart was only making $3 profit before it was a bank, and it is only making $3 after it is a bank. Your claim was that Wal-Mart would be more profitable". True, I did.

Wal-Mart will make more money than before because the shoes

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