After losing hard-fought battles in Oklahoma and California, Wal-Mart Stores Inc. is bringing its banking to Utah.

Wal-Mart on Monday afternoon submitted its application to the Utah Department of Financial Institutions to establish an industrial bank here.

And while critics worry the mammoth retailer will use its market heft to drive smaller banks and credit unions out of business, Wal-Mart insists its bank will be a small, back-office affair.

Wal-Mart Bank's sole function will be to process credit card, debit card and electronic check transactions from its retail locations, according to the bank's president and chief executive, Alan Whitchurch.

The company currently uses a third-party processor for the transactions. Bringing the operation in-house will save Wal-Mart a "significant" amount of money every year, Whitchurch said. He declined to specify how much money would be saved.

"It will be a significant savings when you add up the fractional savings on millions and hundreds of millions of transactions that can be paid to Wal-Mart Bank instead of a money center bank," said Whitchurch, a University of Utah graduate and 20-year banking veteran who comes to Wal-Mart by way of Merrill Lynch Bank.

But some groups still have concerns.

"The chairman of Wal-Mart has indicated that the next major growth area for Wal-Mart was financial services," said Ronald K. Ence, vice president at the Independent Community Bankers of America. "He made it very clear that from a corporate standpoint, the company was interested in expanding into financial services, and he didn't indicate that its interest would be 'limited.' It sounds like a very aggressive corporate philosophy that is inconsistent with the philosophy that they're only interested in a very limited, back-office banking operation."

The worry is having a bank branch in every Wal-Mart store, with the company using its considerable heft to do in banking what it has done in retail: undercut competitors in pricing products, driving out smaller, local businesses. Only in this instance, the products would be home mortgages, business and car loans.

"The largest company in the world would certainly have the financial resources to drive other competitors out of the market," Ence said. "Although all merchants are important in a community, we feel that community banks serve a role greater than one might expect from a financial institution of its size in that they support local merchants and local projects. We're just not sure that, on top of everything else, a branch of a nationwide, 50-state bank would share that local focus."

Three years ago, California lawmakers passed legislation tailored to prevent Wal-Mart from buying an Orange County industrial bank. Earlier this month, the East Bay Business Times reported that attempts to amend the law to allow companies worth less than $1 billion to form industrial banks were unsuccessful.

In 1999, Wal-Mart tried to buy an Oklahoma savings bank, Federal BankCentre, but was blocked by the Gramm-Leach-Bliley Act.

Still, the mammoth retailer pressed forward, offering limited financial services. In January, Wal-Mart announced a no-fee Wal-Mart Discover credit card that offers 1 percent cash back. It has, over the past three years, nurtured partnerships with MoneyGram International and SunTrust Banks, through which it offers services such as money orders and wire transfers.

According to a February 2005 article in BusinessWeek magazine, SunTrust "is experimenting with nearly 45 in-store bank branches co-branded as 'Wal-Mart Money Center by SunTrust,' with plans to expand to about 100 of them by early 2006."

Banking consultant Bert Ely of Ely & Co. in Alexandria, Va., told the magazine: "They're developing, in customers' minds, a link between Wal-Mart and going to the bank. That has powerful long-term implications."

Whitchurch insists concerns are not warranted.

"Wal-Mart will not compete with local banks," he said. "It will not offer loans. It will not set up branches. It will not have any real 'face' to the consumers. It will be a single office, located in a downtown or near-downtown office building."

Whitchurch declined to discuss the bank's likely asset size, except to say that it would be "small" in comparison to some of the state's other industrial banks.

As of Dec. 31, 2004, there were 29 chartered industrial banks in Utah with $120 billion in total assets. Merrill Lynch's industrial bank is the largest, with more than $66 billion in total assets.

Wal-Mart Bank likely will have five to seven employees, Whitchurch said. Most of its operations will take place electronically.

"This will truly be a back-office operation to help process transactions. The public, I don't think, would even be aware of its existence. Customers will not see it in stores. The only effect it will have is that eventually, it (bringing the operation in-house) will lower the cost of stuff at the stores."

At this point, neither the Utah Bankers Association nor the Utah League of Credit Unions object to the bank.

"This application is just another indication that Utah is becoming a global center for financial services," said UBA president Howard Headlee. "Wal-Mart is following the lead of other great companies like GE, Merrill Lynch, UBS, Goldman Sachs, American Express, GMAC, BMW, Volkswagen, Lehman Brothers, Target and many others who have already made significant investments in the Utah economy by establishing a Utah-based industrial bank."

Headlee called the industrial bank industry "the star performer in Utah's recent economic development success" because of the jobs and millions of dollars of investments they bring to the state's low-income communities.

"No matter how you look at this industry, it is good news for Utah," he said. And, he said, "industrial banks are subject to all the same laws, regulations and rigorous examinations as every other bank. The way this particular application is structured, there is no reason to expect any unfair competitive issues."

Scott Simpson, president of the Utah League of Credit Unions, said that "from a competitive perspective, we don't have much of a concern with industrial loan banks. Most, if not all, have very little brick-and-mortar in the state.

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"Based on the application, (Wal-Mart Bank) will have very little impact on the way credit unions will live and operate."

Perhaps. But perhaps not, according to Ence.

"Trust, but verify," he said. "They have actually expressed the same thing (about Wal-Mart Bank's limited functions) to us, and we certainly hope they're being genuine when they're making these claims. But the fact of the matter is that even if they start out in a limited fashion, there's nothing to say they can't expand in the future."

For now, the ICBA says it will wait to see the bank's application.

"If it's an application for a very limited operation, we'd be hard-pressed to find grounds for objection," he said. "It's premature to say."