by Larry Chiang
Walmart experiences economics of card processing painfully. Right now it is paying under 2%. In the future, Walmart with its ILC (industrial loan charter) can issue its own credit card.
An industrial loan charter is a form of credit card bank. The details are hazy to me but the broadstrokes and big picture = this truth.
Walmart can make money making loans. Right now it is generating receivables to credit card banks that get paid 1.5%. Further money is made when consumers do not pay their balances. Further money is made via debit when consumers accidental use their debit card like a credit card. In short, Walmart is paying banks to give them consumer debt in the form of a credit card receivable.
Walmart can be paying a negative ten percent interchange versus the 1.4-1.7%. Perhaps this is why department stores do a credit card. Perhaps this is why Blackstone wants to buy Dell computer and then sell Dell Financial Services to GE capital. Remember Dell makes $50.oo of margin on the desktop and about $100++ on the financing.
Please note: I am guessing and this is my opinion. My expertise is that I read. My experience is that I sell credit cards to sorority girls by first preparing their FICO credit score. I financially benefit from my opinion (I think).
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