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 Business News | November 2006 
Wal-Mart Rides Mexican Retail Banking Wave
 Noel Randewich - Reuters
| | Wal-Mart de Mexico, the country's largest private employer, is likely to get final approval and begin day-to-day operations next week. |
Wal-Mart de Mexico's soon-to-be-launched bank will be the largest in a growing wave of Mexican retail banks expected to take business from big financial groups.
The Mexican government gave the nod this week for retail behemoth Wal-Mart de Mexico and two rivals to open their own banks in an effort to make banking in Mexico more competitive and force down interest rates and fees.
It will be Wal-Mart's first-ever banking operation. The world's largest retailer is not expected to overcome opposition to its plans to open a banking arm in the United States.
Bank branches in retail stores like Wal-Mart de Mexico, controlled by Wal-Mart Stores Inc., are expected to offer credit cards, savings accounts and even mortgages, although companies have stayed quiet about specifics.
The government hopes Wal-Mart de Mexico's clout through almost 900 outlets and exposure to millions of consumers, some of whom have never dealt with banks, will grow the market.
"They're going to make the pie larger, They're going to create a bigger system that more people have access to," the finance ministry's banking chief, Guillermo Zamarripa, told Reuters in an interview on Friday.
After a wave of buyouts in recent years, Mexico's financial industry is dominated by foreign giants like BBVA, Citigroup, Santander and HSBC.
While the foreign-owned banks have resuscitated Mexico's financial system after an economic crisis in 1995, critics complain they should be more competitive.
The central bank accuses them of charging unreasonably high fees and interest rates, and the country's anti-trust watchdog has warned them that it is closely watching the sector.
The growth of retailer-owned banks over the next few years will put pressure on the big traditional players and carve out some of their market share, Zamarripa said.
"The big banks are still going to play a major role, although proportionally a bit less," he said.
Last week, the government gave a green light to retailers Chedraui and Coppel to open banks. It approved an application by appliance seller Famsa earlier this year.
PLENTY OF ROOM
In the United States, Wal-Mart has run into problems trying to open a consumer lending operation because of fears it could muscle out one-branch banks in small towns.
But Zamarripa said unlike the United States, where consumers are saturated with bank products, Mexico's banking industry badly needs more players.
Banks run by retailers have caught investors' attention in Mexico since Elektra, which sells stereos, washing machines and cell phones, launched Banco Azteca in 2002.
Normally no more than a booth at the back of Elektra outlets, Banco Azteca turns healthy and growing profits by lending money to working-class consumers who would not qualify for credit at traditional banks.
"Banco Azteca's success and ability to bring low-income people into the banking system is unquestionable," Zamarripa said.
Wal-Mart de Mexico, the country's largest private employer, is likely to get final approval and begin day-to-day operations next week. It will probably start to operate in the second quarter of next year, Zamarripa said.
Critics warn of potential problems, such as retailers dipping into their banks for cash. Zamarripa acknowledged there are risks, but said: "The value in terms of competition and access these institutions will create is very high."
(Additional reporting by Monica Medel) |
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