Banks Ask Fed to Watch Wal-Mart's Financial Services More Closely

Bloomberg reported Tuesday that bankers have asked the Federal Reserve to increase its oversight of the financial services offered by the world's largest retailer, Wal-Mart Stores Inc. of Bentonville.

Wal-Mart, which has long been interested in expanding its financial offerings into bank-like services (or, heck just outright founding banks), has recently partnered with American Express to offer a prepaid card called Bluebird. Wal-Mart bills the Bluebird service as an alternative to checking and debit accounts, and includes services like bill pay, direct deposit and ATMs.

According to Federal Reserve meeting minutes from December obtained by Bloomberg, the banks believe Wal-Mart has found a back door into the industry that has little to no Fed oversight:

The council urged the Fed to consider limiting payment- related services to “regulated banking institutions,” or at least step up its study of the business. It also said the Consumer Financial Protection Bureau, created by the 2010 Dodd- Frank law, should supervise non-bank companies that provide financial services.

As we noted, this isn't the first time Wal-Mart's ambitions have raised eyebrows among traditional banks.

In 2006, Wal-Mart applied to open an industrial bank in Utah, where it would handle electronic payment processing. At the time, Wal-Mart said the bank would sponsor credit card, debit card and electronic check transactions and nothing more. But banks feared the retailer would use the bank to eventually offer other services. Wal-Mart withdrew the application in 2007, citing "manufactured controversy."

Since then, Wal-Mart has invested in in-store services like check cashing, money orders, bill payment and money transfers through its Money Centers. But it hasn't forgotten straightforward banking: the retailer established Banco Wal-Mart in Mexico in 2008.