Credit unions act at their peril by ignoring Walmart's competitive threat, warned a newly issued Filene Research Institute report.
The fact is, said the report, the giant retailer acts like a "patient strategist" in its bid to offer a full range of financial services targeting CU core lines-auto loans, small business and demand deposits. CU management cannot be complacent about what lies ahead from Walmart.
The report's author, Robert Manning, is a former consumer finance professor at Rochester Institute of Technology in New York and head of the nonprofit Debt Relief Institute. He said Walmart's 2007 failure to gain a formal banking charter has become a moot issue.
That's because the mega-retailer has already expanded a host of banking services at a network of international stores. The 120-page report focuses on Walmart's success in Mexico and is titled "The Blended Walmart Business Model: MoneyCenters, Banco Walmart de M?xico, and the Formidable Challenge Facing Credit Unions." Manning said the evidence of Walmart's intentions is in the broad expansion of the Walmart brand in Mexico.
Walmart, wrote Manning, "brings three advantages that are difficult to counteract: brand recognition, convenience and the ability to cross promote its retail offerings with its financial products."
Manning pointed to U.S. press accounts in July of a linkup with a non-bank firm, Superior Financial, to offer $5,000-$25,000 small business loans at a Sam's Club store owned by Walmart. "Walmart's U.S. MoneyCenters are already attracting customers who, in another era, would likely have gravitated toward credit unions: young, blue-collar, early-career shoppers who come for the low prices and choose the plastic card," wrote Manning.
Walmart doesn't need a bank charter to become a force in financial services, warned Manning.
"Walmart is doing just fine without its U.S. bank charter and even though today the retailer mainly offers ancillary financial products, it will all too soon be playing in credit unions' traditional business model of deposits and loans," he concluded. "An industry already nervous about where its next generation of members will come from cannot afford to ignore the competitive threat brewing at the local Supercenter."
"Walmart is like a gigantic consumer magnet," said a Filene official in discussing the report findings.
"Consumers consistently say that they mainly choose financial providers that are convenient. Who's more convenient than Walmart?"