(June 17, 2010) Utter the name “Wal-Mart” and heads turn in the payments industry. That happened yet again with the revelation this week that Wal-Mart Stores Inc., the world’s largest retailer that tried and failed to get into the banking business, had taken an equity interest in Green Dot Corp., a major player in the prepaid card industry and a key partner in offering prepaid card services to Wal-Mart’s customers. Green Dot is planning an initial public offering and just happens to be in the process of buying a bank.

What to make of Wal-Mart’s investment in Green Dot was not immediately clear. Green Dot did not return a Digital Transactions News call for comment, and a Wal-Mart spokesperson declined comment beyond the amended registration statement that Green Dot filed June 2 with the Securities and Exchange Commission. That filing disclosed Wal-Mart’s investment, which was first picked up by the Financial Times newspaper. Numerous business media outlets then picked up the FT’s report.

Wal-Mart’s stake in Green Dot is small—2.21 million shares amounting to less than 1% of the company’s voting common stock, according to the filing. The document also indicates that Wal-Mart, which now uses the “Walmart” brand name, doesn’t intend to call the shots at Green Dot. “In connection with the share issuance, Walmart entered into an agreement to vote its shares in proportion to the way the rest of our stockholders vote their shares,” the filing says.

Tim Sloane, director of the Prepaid Advisory Service at Mercator Advisory Group Inc., figures that Wal-Mart may have taken the equity investment in Green Dot to keep a close watch on one of its key suppliers. “Wal-Mart has every reason to be on the inside and know what’s going on at Green Dot … this would be a pretty small investment to stay on top of one of your largest supply-chain partners,” Sloane tells Digital Transactions News.

As for Green Dot’s bank, the American Banker newspaper reported on Thursday that Green Dot chief executive Steven W. Streit had said Wal-Mart would play no role in running the institution. In February, Green Dot struck an agreement to buy Provo, Utah-based Bonneville Bancorp, a single-bank holding company, for $15.7 million in cash, and has filed customary applications with state and federal banking regulators (Digital Transactions News, March 2). Wal-Mart’s attempt four years ago to get a Utah industrial loan corporation charter to enter the banking business aroused furious opposition in the banking industry, and the retailer ultimately abandoned the effort (Digital Transactions News, March 19, 2007).

One thing is clear: Green Dot is tied nearly at the hip to Wal-Mart. Under an agreement first struck in 2006, Green Dot started offering the Walmart MoneyCard, a general-purpose reloadable prepaid card, to Wal-Mart customers in 2007 along with issuer GE Money Bank, a unit of General Electric Co. Green Dot provides key program support, including technology and customer service. Last month, the partners extended their agreement to May 2015. The stock issuance to Wal-Mart was part of that extension. According to the filing, Wal-Mart accounted for 56% of Green Dot’s operating revenues in the 12 months ended July 31, 2009, up from 39% in the previous fiscal year. In the five months ended Dec. 31, 2009, Wal-Mart accounted for 66% of operating revenues and 63% for the three months ended March 31.