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In The Media

Walmart Cost of Credit Card Processing and the Surprising Truth of Retailer Revenue

by Larry Chiang on April 6, 2013

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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