Hurray for High Prices?!
From today's WSJ:
"Wal-Mart sought a banking charter mainly to reduce the 2% interchange fee that banks charge retailers to process credit card transactions. Wal-Mart believed it could pass the savings along in the form of lower prices at the cash register. One of the more outspoken critics of Wal-Mart's banking plans was House Financial Services Chairman Barney Frank, who has also been moaning about the high cost that banks charge on credit card transaction fees. Go figure.
Wal-Mart already performs many bank-like functions popular in low-income neighborhoods -- including wire transfers, money orders, paycheck cashing and express bill payment. A Wal-Mart bank inside its stores might have been able to provide lower-cost loans to minorities and the poor -- the same clientele that commercial banks are often criticized for ignoring or sticking with "predatory" interest rates.
Unfortunately, Wal-Mart abandoned its plans to seek a banking license last week, and all of Washington seemed overjoyed at the news. What a weird notion of victory."
Bottom Line: Higher prices and fewer banking options for Wal-Mart shoppers and poor people.
3 Comments:
Ironically, Congress is the first to complain about monopolies [even though they create the cable monopoly] and the FTC has to approve mergers between companies when in their infinite wisdom, they deem the merger to be anti-competitive.
Yet when they have the opportunity to spur competition, they squash it.
Unbelievable.
Yes, I thought that Congress is supposed to pass pro-consumer legislation, and not be anti-consumer. Preventing Wal-Mart from entering banking is definitely anti-consumer, IMHO.
The issue of Wal-Mart entering banking aside, I agree with their goal of addressing interchange fees to lower the cost of goods for consumers.
As Senator Levin recently highlighted in his hearing on the credit card industry, the fees used by the industry have gotten out of hand. Why should everything we buy, whether paying with plastic or cash, be more expensive so Visa and MasterCard can collude to set some of the highest interchange fees in the world. I'm all for companies making a profit for performing a valuable service and credit is such a case. However, interchange fees have doubled in the past five years and are now merely funding rewards cards.
I'm glad to see Congress exercising some much needed oversight.
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