Wal-Mart needs a bank.

I’ve mulled over the retail giant’s credit card-related predicament and I keep coming back to the same conclusion: Wal-Mart needs a bank.

Wal-Mart’s in a quandary. While only 15% of its $378 billion of annual sales are made with credit cards, the company saw a decline of 7.5% of credit card use in its stores over the last year. The rough math will tell you that the retailer has potentially lost more than $4 billion of sales because its “customers have maxed out on their credit limits,” said the company’s U.S. president, Eduardo Castro-Wright, during a recent earnings call, as he explained why in-store credit card usage had fallen.

Now consider that Wal-Mart would have saved, by its own estimation, $245 million by receiving permission to start an industrial bank, and you can see why having a bank would help the nation’s largest retailer.

No doubt Wal-Mart knows this. That’s why the company has recently toyed with the idea of starting a low-cost, low-rate credit card. (Why Wal-Mart talked to Herb and Marion Sandler about the idea is beyond me.)

But Wal-Mart is in a pickle. The industrial bank idea fell flat last year. In fact, even though the movement to ease the Bank Holding Company Act is building (who knows to what degree), Wal-Mart engendered such opposition to its industrial bank that the company is going to have difficulty going deeper into banking.

It doesn’t matter. The financial impetus is great enough for Wal-Mart to jump into the banking fray again. It should begin campaigning for a wholesale change to the BHCA. Continuing to add financial services products is key. Wal-Mart launched its Money Card prepaid debit card just in mid 2007, but debit is not going to make up for the declining in-store credit card usage.

The Wal-Mart Financial Services Network has made tremendous inroads in check cashing and bill pay, for example. I realize that it is unlikely Wal-Mart can successfully alter the nation’s banking regulatory framework, particularly with an incoming Obama administration that is expected to embrace tighter financial services regulation. But Wal-Mart is facing a steep financial price for not trying. I say go for it.

MORE INFO

* Click here for news on how Wal-Mart has considered a low-cost credit card.
* A good article detailing Wal-Mart’s debit card offerings.
* Wal-Mart Money Card site here.