PhillyInc

Reuters

Well, American bankers won their battle (at least temporarily) over Wal-Mart Inc. (NYSE:WMT), which was endeavoring to get a limited banking charter. After several years of hearings before the FDIC, Wal-Mart withdrew its application in March to open a limited service bank. Instead, last week it announced a new plan to expand its "MoneyCenters" nationwide. (See Washington Post here and Financial Times here). Bankers, especially those from smaller banks, had feared the full-bank competition would have hurt their profits. They were joined by unions who objected to Wal-Mart’s anti-union stance.

But just imagine if American automobile, electronic or clothing manufacturers had been successful in blocking competition from imports. Some manufacturing jobs would have survived. But the Philadelphia public would have lost by paying higher prices for less desirable merchandise. Competition is (ultimately) good for us all. Except, apparently, for bankers.

Wal-Mart's new plan is to expand the number of branches where it operates “financial service” centers from 225 to roughly 1000 stores by year-end 2008. Its MoneyCenters offer a limited variety of bank-like services such as check cashing, money orders and a prepaid debit card. Offering these services does not require a banking charter. Wal-Mart estimates it is offering these services at fees 25 percent to 50 percent less than competition and estimates they have saved consumers $450 each.

Just imagine the reduction in overdraft fees if Wal-Mart were to get a bank charter and offer checking accounts! The current $30 or so OD fee would surely be reduced. To $20 or even $15. This indeed would be competition for banks who make a bundle of money from customer mistakes and their need for ultra-short term credit until checks clear/paychecks are deposited. Preserving their monopoly on overdraft fees is indeed worth the fight for traditional American banks, at the expense of the Philadelphia consumer.

- Larry Jilk is a former Pennsylvania bank executive, who does not own stock in Wal-Mart but does own stock in several Philadelphia area banks.

Opinions expressed by contributors to PhillyInc are exclusively those of the contributors.