Canada’s Big Five banks better pay attention—Walmart is moving into the neighbourhood. The retail giant, which has used low prices to steal business away from competitors all over the world, crashed the Canadian financial services party in June with the launch of its Walmart Rewards MasterCard. Could Walmart’s presence shake up Canada’s cozy banking oligopoly and drive down fees for banking services and investment products?
So far, the Walmart Canada Bank is focusing on the MasterCard, but other products may follow in the future. “We’ll continue to look at other areas where we can help our customers save money,” says Walmart Canada Bank CEO and president Trudy Fahie. “At this point I’m not going to speculate on what those products will be.”
Laurence Booth, a finance professor at Rotman School of Management, doesn’t see Walmart driving down fees at the Big Five overnight. He says that even Walmart will be a fringe player, much like Canadian Tire Financial Services and President’s Choice Financial. “We have a wide range of credit card and financial services available to us, and adding Walmart to the list doesn’t do that much.”
Still, as more and more financial services options flood into Canada, the downward pressure on fees could mount. ING Direct, for instance, has just announced plans to launch a no-fee online chequing account called Thrive in early 2011. The account has no minimums, pays a small amount of interest, and even includes overdraft protection. The online bank says Canadians need a cheaper option as we are currently struggling under banking fees that add up to $185 per year on average.
Most of us will cling to the safety of bricks-and-mortar banks, but even a few defectors could help. After all, many credit the online high-interest savings accounts for nudging the big boys to raise their rates a little in response.