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SALT LAKE CITY (AP) -- Wal-Mart Stores has applied to establish a Utah industrial bank.
The bank would process credit card, debit card and electronic check transactions from its retail locations, Alan Whitchurch, the bank's president and chief executive, said Monday.
The retail giant now uses a third-party processor for the transactions. Handling the work itself would save a significant amount of money, said Whitchurch, who declined to say how much money would be saved.
Wal-Mart's application with the Utah Department of Financial Institutions follows five years of attempts to get into banking. Previous plans to buy financial institutions in California, Oklahoma and to partner with a bank in Canada were unsuccessful.
Utah may present it its best chance. General Electric, Merrill Lynch, American Express and Target already have set up industrial banks in Utah. In May, Warren Buffett's Berkshire Hathaway company announced plans to operate a Utah industrial bank to handle consumer loans for its R.C. Willey Home Furnishings stores.
Industrial banks, also known as industrial loan corporations or ILCs, are found in only a few states. They operate like banks with federal deposit insurance and can issue credit cards, take deposits and make loans. About the only thing an ILC cannot do is offer standard checking accounts if its assets exceed $100 million. At the end of last year, there were 29 Utah industrial banks. Combined they had total assets of more than $120 billion.
Whitchurch declined to discuss the bank's likely asset size, except to say that it would be small in comparison to some of the state's other industrial banks.
Critics fear Wal-Mart could drive smaller banks and credit unions out of business.
"The largest company in the world would certainly have the financial resources to drive other competitors out of the market," said Ronald K. Ence, vice president at the Independent Community Bankers of America.
"Although all merchants are important in a community, we feel that community banks serve a role greater than one might expect from a financial institution of its size in that they support local merchants and local projects," he said. "We're just not sure that, on top of everything else, a branch of a nationwide, 50-state bank would share that local focus."
Whitchurch said Wal-Mart will not compete with local banks.
"It will not offer loans. It will not set up branches. It will not have any real 'face' to the consumers. It will be a single office, located in a downtown or near-downtown office building," he said.
Neither the Utah Bankers Association nor the Utah League of Credit Unions objects to the bank.
"This application is just another indication that Utah is becoming a global center for financial services," said UBA president Howard Headlee.
Headlee called the industrial bank industry "the star performer in Utah's recent economic development success" because of the jobs and millions of dollars of investments they bring.
Scott Simpson, president of the Utah League of Credit Unions, said that "from a competitive perspective, we don't have much of a concern with industrial loan banks. Most, if not all, have very little brick-and-mortar in the state.
"Based on the application, (Wal-Mart Bank) will have very little impact on the way credit unions will live and operate," he said.
Utah Commissioner of Financial Institutions Ed Leary said it could be several weeks before Wal-Mart's application is reviewed.
(Copyright 2005 by The Associated Press. All Rights Reserved.)
