Hollie Shaw , Canwest News Service

TORONTO - As worldwide markets plunge, Wal-Mart Canada is vowing to carry its low-cost credo into the financial sector.  The biggest mass merchant in Canada has applied for a banking license, joining the ranks of retailers such as Canadian Tire, Sears and Loblaw.

Two years after luring a former American Express Canada executive to head up its financial services department and expand into non-bank financial products, the retailer posted mandatory public notice on Saturday of its official bank application to the Office of the Superintendent of Financial Institutions.

'A license would allow us get into banking products and the obvious one would be a credit card, but if you look at other retailers the breadth of (potential) products is huge,' Wal-Mart spokesman Kevin Groh said.  "Services common to some other retailers (include) savings accounts, loans, mortgages, RSPs, GICs . . . but at this point it would be premature for us to speculate" the breadth of its offering, he said.

One thing seems certain - the price competition that Wal-Mart Canada has brought to the retail sector in the past decade, from Pampers to groceries, will likely be carried into the banking segment.  "Our approach in everything we have done to date is to be a price leader and eliminate costs that would pass on to customers," Groh said. 

Keith Howlett, retailing analyst at Desjardins Securities, said getting
into financial services is a valuable income stream for retailers.

"It is pretty lucrative for Loblaw and at Canadian Tire it was a big growth driver for them," he said. Credit cards are also a valuable source of information about its consumers, letting them see where and how they spend their money.

"I think Wal-Mart could have a huge opportunity there, and quite a different offering from ING or President's Choice Financial or Canadian Tire and something quite different from the banks. The traffic in their stores is enormous and is skewed to those least likely to get the value-added from banks," he said, noting that banks mostly try to court customers with high income or high savings.

"Wal-Mart could design a business model that goes against the grain." One such business, he suggested, would be to offer a lower-fee option on payday loans and services provided by companies such as Money Mart. "It's a huge, fast-growing business, it covers a huge number of people," but no banks or retailers are tapping into it.

Close to two years ago, Wal-Mart Canada signaled its interest in the banking business when it hired Trudy Fahie, former vice-president of financial services for American Express Canada, to take on the same role - a newly created position - at Wal-Mart Canada. Wal-Mart currently has ATMs and offers extended warranties, wire transfers and emergency bill payments through Western Union.

It's a different story in the United States, where the retailer has met with resistance to efforts to get into banking. Its applications for bank charters in Oklahoma and California were turned down and it ended up withdrawing an application in Utah.