Forbes Magazine reported Tuesday that Walmart's program includes fees for using automatic teller machines outside of their system and for setting up accounts without direct deposit. Otherwise, the service is being categorized as a traveler's check type service, which avoids having it compete directly with retail banks.
Well-known bank analyst Richard Bove, however, is questioning the legitimacy of the service, given the possibility that Walmart is actually running a bank, but dodging banking regulations.
Bart of the Dodd-Frank financial overhaul bill -- the so-called Durbin Amendment -- set limits on fees banks can charge retailer firms for credit or debit card use. But Walmart is not calling its service either of those, circumventing those rules, Bove said.
"Presumably, by using this technique, Walmart avoids Durbin and it can receive whatever "commission" American Express chooses to pay on these cards," Bove said.
"Walmart will be collecting deposits through direct deposit accounts. It receives fees as a consequence of its lending activities through its credit cards. Plus, it hedges its business operations in the financial markets," Bove said.
"Companies engaged in collecting deposits and lending money are by definition banks. Banks are not allowed to be involved in banking and commercial activities. It appears that Walmart is involved in both."
Bove also said there was no information about Walmart's bank-mimicking activities in the company's annual statement.
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