Wal-Mart's bank ambitions in Mexico
Banco de Wal-Mart
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Kai Ryssdal: Later this afternoon we'll get the latest bank closure numbers from the FDIC. Federal regulators have been spending large parts of their weekends the past couple of years shutting down troubled banks -- 109 so far just this year.
It's quite a different story in Mexico. One firm in particular is opening new bank branches left and right down there. The name, I think you'll agree, has a familiar ring to it: Banco de Wal-Mart.
Marketplace's Jeff Tyler reports it's recruiting new business from inside its retail stores.
Jeff Tyler: At this Wal-Mart in Mexico City, all the cashiers ask the same question:
Wal-Mart cashier asks a question in Spanish
Do you have an account with Banco de Wal-Mart? And if not, do you want to open one? Many customers decline -- not because they're happy with their current bank, but because they don't use a bank -- and never have.
Antonio Ocaranza: Seven out of 10 Mexicans do not have a banking account.
Antonio Ocaranza is a spokesman for Wal-Mart de Mexico, also known as WalMex.
Ocaranza: They pay in cash at our stores because they don't have a credit card. They don't have a savings account.
In the last couple years, Banco de Wal-Mart has opened almost 250 branches, with plans to add a hundred more by the end of the year. All courting people who are new to banking.
Forty-year-old Quirina Hernandez is a Wal-Mart customer, but she doesn't use its bank.
Quirina Hernandez: I earn very little, about 600 or 700 pesos per month.
She says she only makes about $70 a month. So there's not much to save. Banco de Wal-Mart is trying to lure such people away from the informal economy, where folks really do keep money under the mattress.
Clemente Ruiz Duran teaches economics at the National Autonomous University of Mexico. He says other financial institutions in Mexico focus on the big fish -- people who already have bank accounts -- leaving all the little fish for Banco de Wal-Mart.
Clemente Ruiz Duran: They have a very specific niche. So I don't think that anybody will be competing with them.
The bank does not offer car loans or mortgages, but WalMex's Ocaranza says it does offer a credit card so customers can buy Wal-Mart merchandise.
Ocaranza: That will allow a family to buy their first TV set, their first refrigerator or washing machine and so on, then we're also helping generate the sales for our units.
That's good for the bottom line at WalMex, and it does help poor folks establish a credit history.
But Professor Ruiz says there's not enough emphasis on saving and investment.
Ruiz: They only help them to consume. People get indebted with things that they don't require really, you know?
Debt comes at a high price with Banco de Wal-Mart's credit card. Get ready for this: The annual interest rate is 60 percent. That's about double the average in Mexico. The central bank has been talking about capping interest rates. But Walmex's influence can't be discounted; it's the biggest employer in the country.
Anna Gelpern: Wal-Mart already has tremendous power, and it would be a very difficult entity to regulate, sort of by analogy with our too-big-too-fail debate.
Anna Gelpern is a law professor at American University, Washington. She's studied the regulatory issues surrounding Banco de Wal-Mart. The majority owner, Wal-Mart, is based in the U.S., where it's not governed by financial regulations because it's not a financial company.
Gelpern: So if the decisions are made in Arkansas, there is no U.S. regulator to talk to. Mexico is very much on its own as a financial regulatory matter.
Mexico is not alone in terms of Wal-Mart's ambitions. The company recently launched new banking services in Canada. And Wal-Mart is also making in-roads in the U.S., despite previously being blocked from the banking industry here. Its Sam's Club division is taking part in a pilot program, where qualified customers can get small business loans of up to $25,000.
I'm Jeff Tyler for Marketplace.