FINANCE Bloomberg Businessweek March 8, 202129Walmart Inc. just took one step closer to becoming
a competitive threat to big banks. The world’s
largest retailer has lured a pair of senior bankers
from Goldman Sachs Group Inc. to run a financial
technology venture.
The move alarmed Wall Street, which has
been begging regulators to halt recent efforts
by retailers and startups to begin offering coreGalvin won’t be dissuaded. He notes in the
complaint that one customer with no investment
experience made more than 12,700 trades in just
over six months. Robinhood has said it can’t know
if this is true, because Galvin hasn’t named the cus-
tomer. Massachusetts residents have more than
486,000 Robinhood customer accounts with a total
value of more than $1.6 billion.
Galvin, for whom smiles don’t come easy, isn’t
a typical back-slapping politician. He won a seat in
the Massachusetts House of Representatives in 1975,
the year he graduated from Suffolk Law School, and
has served longer than any other current statewide
elected official in the Bay State. “He’s unafraid to
stand up on his own, alone, and say this is the right
thing,” says Michael Goldman, a veteran Democratic
political consultant. “If you’re his worst enemy and
he thinks you’re right, he’ll stand with you.”
Galvin extracted huge penalties from mutual
fund companies in the early 2000s after a market-
timing scandal—investment managers had allowed
some traders to move in and out of funds to profit
from short-term pricing discrepancies. After the
subprime crisis, he went after banks for selling
shoddy mortgage-backed securities. Nothing about
Robinhood seems new to Galvin, who’s been filing
day-trading-related cases for decades. It’s just that
the internet’s reach makes the problems bigger, he
says. Galvin looks down at his Motorola flip phone,
which has chirped to life. He says it’s time to go.
—Matt Robinson and Prashant GopalTHE BOTTOM LINE Galvin says Robinhood’s business model
encourages trading at the expense of good investment decisions,
and argues that this violates a new rule in Massachusetts.What If Walmart
Was Your Bank?
○ The retail giant just poached two Goldman
Sachs execs. Wall Street is getting nervous○ Ismailbanking products to millions of consumers.
“These are substantive hires that should serve as
an unambiguous signal of Walmart’s seriousness
regarding its fintech foray,” says Isaac Boltansky,
an analyst at Compass Point Research & Trading.
“The regulatory moat that has shielded traditional
commercial banks is steadily evaporating, and the
competitive risks are profound.”
To lead its effort, Walmart plucked Omer
Ismail, a veteran of Goldman Sachs who was a key
architect of the bank’s consumer efforts in recent
years. Ismail will bring along David Stark, who
engineered Goldman’s partnership with Apple
to offer a credit card and oversaw tie-ups with
JetBlue Airways and Amazon.com.
Ismail’s hiring could be a precursor to Walmart
filing an application to operate a bank of its own.
The Federal Deposit Insurance Corp. late last
year formalized rules to allow nonfinancial busi-
nesses to set up so-called industrial loan compa-
nies. Traditional banks have complained these
charters allow companies to enter banking while
escaping the capital and other liquidity demands
they’re forced to follow. Bank trade groups, along
with the Center for Responsible Lending, a con-
sumer group, said in a December statement the
new rules could undercut “the long- established
separation of banking and commerce.”
Walmart isn’t currently planning to apply
for bank status, according to a spokesperson.
Even so, Chief Executive Officer Doug McMillon
has begun to hint at broader ambitions, telling
analysts just weeks ago that customers have been
asking Walmart to offer affordable financial prod-
ucts, and that he wants to find ways to “monetize”
the retailer’s vast amount of data. With more than
150 million customers and 5,300 stores across the
U.S.—many of which are open 24/7—Walmart would
instantly have a consumer base and network of
branches that would rival those of Bank of America,
JPMorgan Chase, and Wells Fargo.
The research company M Science estimates the
average person goes to Walmart’s stores or website
about 30 times a year, almost double the number
of visits received by rival Target Corp. “Anything
that drives a deeper relationship with their core
business, which is selling stuff to consumers, is
their No. 1 goal,” says John Tomlinson, an analyst
at M Science.
If Walmart does eventually move to start a bank,
it won’t be its first attempt. In 2005 the retailer
applied to be an industrial bank in Utah. The
application soon drew the attention of critics of its
broader business practices, such as its treatment
ISMAIL: GOLDMAN SACHS. MCMILLON: DREW ANGERER/GETTY IMAGES. LOCATION FIGURES ARE LATEST AVAILABLE. *INCLUDES SAM’S CLUB. DATA: of workers and the amount of goods it imported
WALMART, FEDERAL DEPOSIT INSURANCE CORPORATION Locations in the U.S.
Wells FargoWalmart*JPMorgan ChaseBank of AmericaTruist FinancialU.S. BancorpPNC Financial ServicesRegions Financial5,4135,3424,9804,2542,9212,7742,3241,400○ McMillon