Walmart store entrance
Credit: Getty Images/iStock

When we ponder the implications of anything that is both big and financial, we should also ask ourselves which is the greater problem. They can both be troublesome. So, if you want to reform our screwed-up financial system and you want to stop the rising corporate concentration in this country, then there are many challenges in common. Wall Street reformers have to be anti-monopolists too.

Exhibit A: Walmart’s shiver-inducing plan to get into finance.

With its 5,300 stores in the United States, the Bank of Walmart would instantly become a behemoth among competitors, rivaling giants like JPMorgan Chase and Bank of America, and striking icy cold fear into the hearts of small bankers. We’ve seen a version of this story before. Walmart sought a bank charter in the decade leading up to 2007, but abandoned the effort in the face of intense opposition from banks of all sizes and consumer groups.

This time around, Walmart is going the route of creating a “fintech”—a financial technology firm—in partnership with a venture capitalist, Meyer Malka of Ribbit Capital, which happens to be an investor in the now-infamous online broker Robinhood. Walmart has also hired a pair of Goldman Sachs guys to run this venture. Heartwarming, isn’t that?

Although they are many things, fintechs are in part a way to bask in the reflected glory of Silicon Valley—“We do good by doing well”—while dodging the infamy of Wall Street or predatory lenders. The term came into widespread use over the last decade, when bank reputations were shot after the 2008 financial crisis, but before Facebook, Google, and Apple started to drag down the tech industry’s rep in earnest.

If Walmart getting into banking scares banks, then Walmart getting into fintechs should terrify anyone who shops at Walmart. And that’s more than 150 million people! Bloomberg tells us too, that the average person goes into Walmart 30 times per year. It knows what you buy, and when you buy it. It can probably figure out who your family is, and what they buy. And it can buy even more data with its ample resources.

Between the data itself and the myriad ways of crunching it, there’s no end to what Walmart knows, or could know, about its customers and people related to them, even ones who don’t shop there. Also, Bloomberg:

CEO Doug McMillon has begun to tease some of his ambitions, telling analysts just weeks ago that customers have been asking the retailer to offer affordable financial products … The goal is to “monetize their most valuable asset—the frequency and relationship they have with customers across the globe,” John Tomlinson, an analyst at M Science, said … “Anything that drives a deeper relationship with their core business, which is selling stuff to consumers, is their number one goal.”

Ready for a “deeper relationship” with Walmart, folks? That sounds like some sort of commercial colonoscopy, with Doug McMillion twisting the probe every which way he’d like to go.

In fact, getting, say, an installment loan from Walmart instead of a bank or an independent company could be a very different experience. In places where Walmart is the main retailer — and that’s a lot of places — your lender would know exactly what you bought. Walk into a small community bank and you’ll be able to talk to someone about your finances. Walk into Bank of Walmart and you’ll talk to someone who reads numbers from a computer screen. It’ll be a very corporate experience.

The focus of controversy over Walmart in 2007 was its application for a bank charter, a particular species known as an industrial loan corporation. The new Bank of Walmart (at the time, Wal-Mart) would have been able to take deposits, make loans, and issue credit cards. Banks hated the prospect of the competition, with small bankers particularly fearing Walmart because of its ubiquity. Traditionalists and some regulators disliked it because the Depression-era Glass-Steagall law enshrined a separation of finance and industry so that a crisis in a big commercial firm (like a retailer) would not endanger a large financial institution it controlled.

Since then, Trump’s appointee as chair of the Federal Deposit Insurance Corporation, Jelena McWilliams, has made it easier to get an ILC charter. Opposition to that step included banks and consumer groups (read more here) but that may not matter. Now, 13 years later, Walmart is being cagey about its plans to actually have a bank, a depository, with all the rights and privileges thereof. It is not “currently” planning to do so.

It may not need to. Many fintechs have gotten off the ground without actually owning a bank; partnerships with banks can substitute. The critical input for extending credit and other decisions made by lenders is information, and Walmart has a lot of that, as its CEO brags. (In fact, they have what you might call Facebook-like amounts of data about you.)

And here we come to the crux of the problem: the danger here isn’t only that Walmart might get control of a bank, although we shouldn’t want that. The danger here is that Walmart is big. Huge. The solution to this problem is not only to deny Walmart a bank. The solution here is to break Walmart up into smaller, competing entities.

The effect of Walmart on competition and communities is well-documented enough that it has its own name, so there’s no need to dwell on that. But without downsizing Walmart—entirely appropriate if we decide we want an effective antitrust regime—we may still very well end up with the deleterious effects of having a commercial firm engaged in finance. (And to boot we will have Facebook-levels of privacy issues as Walmart puts to work the data about you it has vacuumed up.)

Put another way, if we apply the solutions offered by financial reform advocates, we may keep Walmart out of traditional banking, but we probably won’t keep it out of finance, and it’ll be a real challenge to regulate since it won’t have to follow rules enforced by bank regulators. If we apply the solutions offered by anti-monopolists, we get smaller retailers who collect less data, and thus have less power to monetize it in finance. They might not even have the incentive to do so.

If Walmart doesn’t get a bank, we should be happy. But we should want more.

Carter Dougherty

Follow Carter on Twitter @CarterD. Carter Dougherty is a writer and financial reform advocate based in Washington, DC. He writes a newsletter called The Money Trust.