But does it even need to open branches?

David Baker of the Colorado Bankers Association said the giant retailer essentially has several dozen teller windows (check stands) in its stores that it already uses to provide an array of financial services: payroll check cashing, money transfers, credit and debit cards, and express bill-pay services.

Although many critics are fearful about the in-store bank branches they contend Wal-Mart eventually will operate, that focus is misplaced, Baker said. "It's irrelevant. Wal-Mart doesn't need to build booths in the corners of its stores with a 'Wal-Mart Bank' sign on top. It already is in the banking business."

Banking is essentially the business of accepting deposits, making loans and transferring money to meet customer's payment obligations. What the proposed Wal-Mart Bank will provide the retailer is the remaining pieces of banking that it already doesn't have, such as the ability to accept deposits and to process credit and debit card payments.

Baker's comments were made to the Federal Deposit Insurance Corp., which conducted a hearing earlier this week in the Kansas City area. This was the second round of talks on Wal-Mart's application for deposit insurance for its proposed Utah industrial bank.

Industrial banks, known as industrial loan corporations, are found in only a few states. Utah is home to more than 30 such companies, which hold upward of 80 percent of all industrial bank assets in the U.S.

They can take deposits, issue credit cards and make loans. About the only thing they cannot do is offer checking accounts if their assets are more than $100 million. Industrial banks, though, are regulated by the individual states that charter them and are supervised by the FDIC. In contrast, national banks are regulated by the Federal Reserve. And it is that lack of oversight by the Federal Reserve that had many critics complaining during the FDIC hearings that industrial banks are not adequately regulated.

Representatives of community and regional banking organizations at the Kansas City hearing overwhelmingly spoke out against Wal-Mart's application. They argued that throughout its history the retail giant has dominated every business sector it enters.

And many fear the same thing will happen if Wal-Mart begins to compete with small-town banks.

"It would be very difficult for banks to compete with huge commercial entities that can bundle financial services with other products and services [on which] they enjoy much wider profit margins," said Ken Littlefield of the Missouri Bankers Association.

Bankers were especially critical about Wal-Mart's plan to acquire brokered deposits, offer high-interest certificates of deposit to large investors and to accept deposits from nonprofit organizations. Such practices, they contend, could drain capital from community banks, force them to cut back on lending or even shut down.

Jane Thompson, president of Wal-Mart Financial Services, countered that community nonprofit organizations might be offered a slightly better interest rate on deposits with Wal-Mart Bank, which in turn would benefit their operations. And brokered deposits are available to any well-capitalized bank that wants to pay for them.

Not everyone is critical.

Craig Baker, executive vice president of Domestic Bank in Cranston, R.I., which has three of its six branches in Wal-Mart stores, described the company as a great partner and said he does not view the company's practice of cashing customer payroll checks or selling money orders as any untoward competition.

"There are a lot of companies that will cash a check or issue a money order," he said. "I suppose if they were to begin offering auto loans or checking accounts it would be a different matter."

Wal-Mart contends it will use its industrial bank only to process in-house the millions of credit- and debit-card transactions that take place every day at its stores. The company needs a bank to do that because Visa and MasterCard require that such processing take place under the auspices of a federally insured bank.

By bringing the task in-house rather than contracting with outside banks, which it now does, Wal-Mart believes it can save up to $10 million a year.

"But that is just initially. Our processing costs have been growing at 12 percent a year, so we will be looking at some very significant savings in the future," said Tom McLean, who will serve as chief operating officer of Wal-Mart Bank if the company is successful in securing the needed deposit insurance.

Dale Torpey, president and chief executive of Federation Bank in Washington, Iowa, hopes Wal-Mart does not get the deposit insurance.

Having a company the size of Wal-Mart owning a bank will put the entire banking system at risk, along with the FDIC insurance fund, he said.

"Of course Wal-Mart says they would not fail, but that is what we all thought about Enron. Can you imagine what would have happened to our financial system if Enron had operated a bank?"