August 30, 2005

Every Era Has Its Seemingly monolithic and indestructible corporation that, mainly because of its success, the public loves to hate. In the 1960s and early '70s it was "Ma Bell" (AT&T), in the late '90s it was Microsoft and at the beginning of the 21st century it is Wal-Mart. There is no denying that the Bentonville, Ark.-based retailer has taken no prisoners (to put it mildly) on its trek to become the world's largest retailer. But I also think criticizing Wal-Mart is a way for competitors to avoid addressing their own weaknesses.

How often have you read a heart-rending article about a small-town retailer that was going to be put out of business by the new Wal-Mart opening in town? Yes, it's sad when local businesses fail. But independent retailers have no right to be in business just because they've been around a long time or the owners are nice - they have to earn their success. Too often these merchants have failed to update the ways in which they do business - in terms of the merchandise they carry, the customers they target and serve, and the ways in which they manage transactions and operations.

Wal-Mart has been both praised and criticized for seemingly wanting to rule the (retail) world, and that strategy increasingly is taking the corporation into the world of payments and banking.

Last month, Wal-Mart applied to charter an industrial loan company (ILC) in Utah, in order to process debit, credit and electronic check transactions (and reduce costs). This action has the Independent Community Bankers of America (ICBA), among others, up in arms. In a statement, ICBA president/CEO Camden Fine said, "Mixing banking and commerce is a dangerous combination that would produce an excessive concentration of economic power, jeopardize the impartial allocation of credit, and extend the Federal safety net where it was not intended. We are aware of Wal-Mart's current 'no-branching' pledge, but are concerned that over time their business plans will change and they will seek to engage in retail banking operations."

Well, duh. Not only will Wal-Mart eventually seek banking powers, its customers will want that to occur. And if it's not Wal-Mart, it will be Starbucks, Amazon, Whole Foods or some other entity that knows how to combine tech-savvy with customer insight and creativity.

Katherine Burger, Editorial Director kburger@cmp.com

ABOUT THE AUTHOR
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & ...