Wal-Mart Rolls Out Bank in Mexico

by Mark Friedman  on Monday, Feb. 25, 2008 12:00 am  

Gardner said Wal-Mart studied the market and concluded that its products are "very competitive compared to similar products."

He also said other factors should be taken into account when looking at the interest rate. For example, he said, the products in Wal-Mart's stores are cheaper than at other retailers.

Wal-Mart also considered the risk to the company in loaning money.

And Wal-Mart has a program to reward customers who pay on time. The plan works like this: In a 12-month payment plan, if the customer isn't late, Wal-Mart will give the customer a gift card loaded with the amount of the last monthly payment, Gardner said.

As Banco grows, the interest rates might improve. But for now, the rates "are attractive considering the demographic that we are targeting as potential customers," Gardner said. "We are constantly evaluating our products in order to make them even more appealing to the market."

But even to Rochin, Wal-Mart's 75 percent annual interest rate seems high for the Mexico market.

He said that if Mexicans knew about the rate, "they would probably choke and not do it. The problem has been they often trust American businesses, and they may be taken in by this trust without realizing what they would end up paying."

Rochin said he didn't know the going rate for similar loans in Mexico, but Business Week recently reported that Mexican for-profit banks charge customers with poor credit between 50 and 120 percent annual interest rates.

'Easy and Simple'

After failing four times to get a U.S. bank - most recently applying for an industrial bank charter in Utah - Wal-Mart vowed not to try again. Instead, Wal-Mart turned to Mexico, where the company's international division started in 1991.

By November 2006, Mexico's finance ministry awarded Wal-Mart de Mexico the license to organize and operate a bank in the country.

"I don't know all the politics behind it, but they obviously have been able to overcome any political objections ... from banks and retailers down there," said Bert Ely, a banking consultant in Alexandria, Va. "It's interesting it doesn't seem to have been a big issue down there in the way that it was an incredible issue up here."



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