Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

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Will Kroger Launch a Bank?

Walmart Stores Inc. (NYSE: WMT) it seems is very close to launching a bank. Over the past decade the nation’s largest retailer has started offering a wide variety of financial services to its customers ranging from tax preparation to checking accounts.

As our friends at Global Risks Insights noted in a recent Seeking Alpha commentary, the only thing stopping Walmart from opening a full service bank has been political pressure. Now Walmart has effectively and cleverly found a way around this roadblock with the help of partners like Green Dot (NYSE: GDOT) and American Express (NYSE: AXP).

Walmart offers a variety of banking services cleverly disguised as “prepaid debit cards” with both Green Dot and AmEx. The Green Dot products—the Walmart Money Card and Green Dot Money Pak—even offer checks and a checking account. Consumers can even use it to pay their rent and access cash through an app similar to Apple Pay.


The only things Walmart is not currently offering are mortgages, business loans and car loans, and I imagine that they are coming at some point. One way Walmart could offer such loans would be to team up with a crowdsourced financial solution such as Lending Club (NYSE: LC). Lending Club could offer the loans from a booth or table in Walmart stores much as Jackson Hewett now offers tax preparation at some Walmart locations. Another would be to have a link to Lending Club or Prosper Loan Services at

Is a Kroger Bank Coming?

It looks as if Walmart is now in the banking business. This has to make me wonder if America’s largest grocer is going to follow Walmart’s lead and jump into banking. After all, Kroger (NYSE: KR) seems to do everything Walmart does: opening supercenters, starting filling stations, opening clinics in its stores, etc.

Kroger already offers a variety of financial services in its stores, including check cashing, money orders, wire transfer and prepaid cards. Kroger offers a credit card that has a direct tie-in with its rewards card program. Some Kroger stores also have real banks in them.

Opening a Kroger bank would seem like the next logical step. The two largest supermarket chains in the United Kingdom, Tesco (OTC: TSCDY) and Sainsbury’s (OTC: JSAIY), operate full service banks that even offer mortgages.

Kroger might have an easier time entering banking than Walmart because it seems to be able to avoid anti-trust concerns. Kroger has avoided the kind of public anger Walmart often generates for three reasons:


  1. Kroger operates under a variety of brand names – King Sooper’s in Colorado, Ralph’s in California and Harris Teeter on the East Coast. It goes out of its way to preserve the independence and regional flavor of its subsidiaries. Many people do not even notice that their favorite regional grocer is now part of a national retail giant.


  1. Kroger is largely a union shop paying a higher wage (around $14 an hour for the average employee as opposed to $9 at Walmart). This buys goodwill in the community and makes Democratic politicians and their allies in the media less likely to go after Kroger.


  1. Kroger simply is not as large or as powerful as Walmart.


A bank would be another center of revenue for Kroger and would drive additional traffic to its stores. It would also entail some regulatory and political ramifications that the grocer might be loath to avoid as well as pressure from credit card and other financial services companies.

A Kroger Bank would also enable the grocery giant to offer its own digital wallet, perhaps in conjunction with its massive rewards card program. Kroger is one of a consortium of retail giants developing CurrentC, a digital wallet compatible with rewards cards that is designed to compete with Apple Pay.

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Operating a bank would also allow Kroger to interphase directly with apps like Apple Pay, Google Wallet and Venmo and avoid the fees charged by the financial services industry. That alone might be enough to entice Kroger into banking.

Why Kroger Might Want to Stay out of Banking

One big reason why Kroger might want to avoid banking is that a Kroger Bank could pave the way for a Walmart Bank. Walmart could use such a precedent for its own banking venture.

Even though its reputation has been tarnished by sluggish sales, Walmart has lost none of its competitive growth. That might be a competition Kroger wants to avoid.

Kroger may also want to avoid direct competition with such aggressive competitors as Bank of America (NYSE: BAC) and Google Inc. (NASDAQ: GOOG). Google has been slowly moving into the financial services industry by offering a growing array of loans and similar products.

One thing is clear: even if Kroger stays out of banking, we will see a wide variety of alternative financial institutions operating in America—many of them in places where we would not expect to see them.

Your blogger owns shares of Kroger and plans to keep them for a very long time.