Wal-Mart has revolutionized the retailing business. It forced smaller competitors to compete where they are weak: on price. Wal-Mart did so by utilizing five practices that are relevant to the banking industry today:

Offering a broad range of standardized products.

Using scale in technology to become a low-cost producer.

Using technology to be best-informed on product and customer profitability.

Offset low margins with high volume.

Turn inventory faster.

Some national banking players that use Wal-Mart strategies are emerging, and in the process they are becoming more competitive against small banks. Consider the following:

Standardized products. First Union Corp. uses the Cap Account as a mass customization vehicle to achieve full standardization from the bank's perspective. Yet from the customer's point of view, the product is highly customized.

This wrap account sweep product includes certain standardized features, but the customers decide on the specific contents and selects the features that reflect their risk profiles. This account has been aggressively marketed in the past two years and now houses $16 billion of deposits. In New Jersey alone, after the First Fidelity acquisition, $1.2 billion was raised in this account.

The First Union product constitutes an effective attack on all competitors. It is cost-effective, complex, meets a wide variety of customer needs, and competes with small banks as well as the brokerage industry. Citi Gold is a high-end product package with similar features offered by Citibank to depositors with $125,000 or more.

Scale in technology. One of the better examples of using scale in technology is Chase Manhattan Corp., a bank that has made great progress in incorporating technology into its business proposition.

Chase spends $1.8 billion a year on technology, about one-third of which is discretionary. Chase uses its enormous buying power to rebid external vendors, reducing unit costs in its quest to become a low-cost provider and utilize that position as a competitive advantage.

Chase also requires all its internal technology providers to forecast unit costs three years ahead and to support service quality by negotiating service-level agreements between all internal providers and their users. This provides a competitive edge for Chase in pricing its technology- and processing-intensive businesses.

Customer information. Norwest Corp. has made major strides in identifying and utilizing product profitability and customer-needs analysis. The company now has an enterprisewide data warehouse that includes its mortgage and finance companies' information. Norwest has set up a direct bank just to work off the data base and make use of the information.

The company is uniquely well positioned to see what customers are most likely to buy and how profitable the relationship is. It now has an edge in mass marketing and selling highly customized products.

Offset low margins with high volume. We are all striving to do this, but the best examples of practical success in the financial services industry are still the monoline companies. The large mortgage banking companies, particularly, have done an outstanding job of offsetting razor-thin margins.

Inventory turnaround. Banks have the unique opportunity to turn over their "inventory"-i.e. their loans-using securitization. Securitization has made it possible for banks to manage their balance sheets more effectively while reducing capital requirements, resulting in a better return on equity. Large banks are turning their inventory faster and utilizing loans to generate fee income by continuous securitization for many asset classes.

Wal-Mart is a formidable competitor, but it creates opportunities for niche plays, particularly where customers do not value price above all. Niche plays offer the best opportunities to compete against the Wal-Marts of the banking business.

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