Any suggestion that Wal-Mart's going to become a bank is generally met with howls of controversy.

The discount retailer, which backed away from applying for a bank license in 2007 in the face of opposition, is now deftly plying partnerships to offer financial services enabled by point of sale automation.

Through a partnership with prepaid card technology and services provider Green Dot, which now includes an equity stake, Wal-Mart's poised to become a formidable player in the battle to win the financial services business of underbanked and unbanked consumers from banks that are also trying to tap those sectors. "[Wal-Mart's] clearly interested in providing financial services to its customer base," says Red Gillen, a senior analyst at Celent. "And a lot of it can be done without Wal-Mart actually becoming a bank."

The latest round of Wal-Mart buzz results from an SEC filing that says Green Dot's issuing 2.2 million shares of class A common stock to Wal-Mart-or about a one percent voting share. Green Dot, whose IPO was in July, is also seeking Fed approval to buy Utah-based Bonneville Bancorp, potentially adding more financial services heft to the reloadable "MoneyCards" that Green Dot provides to Wal-Mart on a commission basis. Green Dot's services also include call center and portfolio management.

Nick Einhorn, an analyst at Renaissance Capital in Greenwich, CT, says Green Dot's Bonneville acquisition will allow Green Dot to advertise its products as bank accounts, which it's not allowed to do now under regulatory rules. Wal-Mart gives Green Dot access to a large retail presence. "Green Dot doesn't have any locations of its own. It uses Wal-Mart to get access to a huge part of America," he says.

Wal-Mart would not comment on how the relationship will allow it to expand its financial services, while Green Dot recently told American Banker that Wal-Mart would not play a role in managing Bonneville Bank.

What the relationship will do is expand Green Dot's technology-enabled card products, which would enable Wal-Mart to extend more automated point of sale financial services such as payments or savings accounts. "Access to FDIC coverage would potentially strengthen the products that Green Dot offers and would expand their product line, which could benefit Wal-Mart," says Beth Robertson, a director at Javelin Research.

Billpay and automated savings accounts are just the tip of the financial services iceberg. "One product that comes to mind is small lines of credit, in hundred dollar increments, allowing users to establish a line of credit. That's something that Green Dot can offer [at Wal-Mart] because they will be a bank [after the Bonneville acquisition goes through]," Gillen says.

Wal-Mart is also providing financial services in other countries, such as its recent approval in Canada to launch Wal-Mart Canada Bank and its launch of Wal-Mart Rewards MasterCard. "Most countries have in a way or another have retailers involved in producing financial services products," says Gwenn Bezard, research director at Aite Group.

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