WM wants its own industrial bank in Utah.
Discount behemoth Wal-Mart announced Tuesday that it is seeking to establish an "industrial bank" in Utah that would help eliminate third-party transaction costs that the retailer currently incurs from processing of credit, debit card and electronic check transactions in its stores.Of course, independent bankers are worried.... as are some lawmakers... and some anti-Wal-Mart activists...According to the company, Wal-Mart receives more than 140 million credit, debit and electronic check payments per month and pays a small fee to process each transaction.
But let's do some back-of-the-envelope math: 140 million monthly x 12 = 1.7 billion transactions annually. Five minutes of research tells me that the average cost is about 10¢ per ACH transaction, which is the approximate amount Wal-Mart pays to its banks. But about about half of that is paid by the bank to the ACH network. Hence, I'd estimate that Wal-Mart stands to avoid paying about 1.7 billion x 5¢ = $85 million dollars in fees annually, because it will be paying them to itself.
The real savings to Wal-Mart will be if it 1) can run its own bank more efficiently than its current third-party bank, 2) can eventually turn this industrial bank into a consumer bank.
In addition, I gather that this will permit a savings in personnel in Bentonville, as will be used as a reorganizing tool in the business process arena...
Posted by Kevin on July, 19 2005 at 02:40 PM
