The furor and delays over Wal-Mart's (NYSE:WMT) attempt to form an industrial loan corporation (ILC) have pretty much forced the retailer's hand to drop its bid. Securing an ILC charter would have allowed Wal-Mart to engage in many bank-like activities -- the key difference being that ILCs can't offer demand (non-interest-bearing) deposits.

What gives? It seems kind of strange when you consider that Target (NYSE:TGT) -- which would pretty much be Wal-Mart if there were no Wal-Mart -- was granted an ILC charter. And it's worked out pretty well for the company that's probably most like Wal-Mart. General Electric (NYSE:GE), Toyota (NYSE:TM), and Pitney Bowes (NYSE:PBI) are other juggernauts in their industries that have ILCs.

So again, what gives? I believe the problem is mainly a public-relations one. When you think of Wal-Mart, you think of the guy in the movie 300 (haven't seen it yet, but the trailer rocks) -- a warrior who would pretty much demolish anything in his path. But when you think of Target, you think of a cute dog with a red target painted around its eye. Keep in mind that Wal-Mart is known for destroying all that dare defy it: dog food, music, and toys are just some of the categories Wal-Mart has crushed its opponents in. So it's not hard for me to understand why opponents would do all in their power to deny Wal-Mart an ILC.

Wal-Mart's strengths, first and foremost, are its distributional skills -- a very different skill-set from retail banking. Wal-Mart wins at what it does because you can buy shampoo there for 35 cents less than you can somewhere else. On the other hand, banking customers seem to be oblivious to the fact that their savings deposit earning 0.5% could be earning 10 times that in an online money market (and I am, for now, one of those oblivious people).

In other words, I don't believe Wal-Mart will be able to use a pricing advantage on price-insensitive depositors. (Yes, they will have foot traffic, but as I said in an earlier article, Wal-Mart already has banks in its stores, and it's not as if those banks are putting competitors out of business). Not only that, but an ILC can't offer interest-free deposits, so any regular bank would have a lower cost of funds. All of this also ignores the reality that Wal-Mart has repeatedly stated that it never planned on opening retail branches, but only wanted to process credit card transactions less expensively.

However, the point is largely irrelevant, since Wal-Mart dropped its bid. You can be sure, and the company has already announced, that it will continue to push into financial services, because of the high returns and low capital requirements involved. In any event, I think the fears over Wal-Mart's ILC attempt were overblown and unjustified.

Related Foolishness:

Wal-Mart is a Motley Fool Inside Value recommendation. Pitney Bowes is a Motley Fool Income Investor pick. Try any one of our investing services free for 30 days.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.