The debate has even reached Capitol Hill, where Rep. Paul Gillmor of Ohio and Rep. Barney Frank of Massachusetts, both members of the House Financial Services Committee, have asked the FDIC to hold hearings. "This is a very controversial application filed by the company that is the largest retailer in the world," they wrote.

David Barr, an FDIC spokesman, said that if such a hearing was held, it would be the first in 20 years.

The FDIC is expected to rule on the Wal-Mart application by July 2006. Rejections are rare. Wal-Mart is also awaiting approval from Utah, one of the few states that allows retailers to open industrial banks.

Wal-Mart has made no secret of its banking ambitions. In 1999, the company tried to buy an Oklahoma thrift, prompting federal legislation that banned commercial companies from buying thrifts and unraveled the deal. In 2001, it attempted to strike a partnership with a Toronto bank to establish branches inside its stores, a plan blocked by the U.S. government. And in 2002, it tried to buy a bank in California, a transaction thwarted when the state banned such arrangements.

This time, Wal-Mart is trying to avoid those pitfalls by creating an industrial bank with the narrow aim of eliminating the payments it makes to third parties for the roughly 2.4 billion electronic payment transactions it handles every year. The bank will, however, accept limited deposits from nonprofit groups.

"Wal-Mart will not have its own bank branches inside our stores or outside of them," said Thompson of Wal-Mart. As evidence of the bank's limited scope, Thompson pointed to the 300 different community banks that already operate in more than 1,000 Wal-Mart stores. "We have long-term arrangements with these banks," she said.

The bank, to be called Wal-Mart Bank, already has a headquarters in Salt Lake City and a president.

But if the letters to the FDIC are any indication, community banks still believe Wal-Mart poses a direct threat.

"Wal-Mart is well known for entering a community" and "driving out the local competition," wrote Martin J. Schmitz, president of Citywide Banks of Colorado. The bank proposal, he added, would "pose unacceptable risk to the banking system and its regulatory safety net."