Customers shop at a Walmart Supercenter in Hallandale Beach, Florida, on February 20, 2024.
Joe Raedle | Getty Images News | Getty Images
Walmarts The retailer’s majority-owned fintech startup One has begun offering “buy now, pay later” credits for expensive items at some of the retailer’s more than 4,600 U.S. stores, CNBC has learned.
The move puts One in direct competition Confirmthe BNPL leader and exclusive provider of installment loans for Walmart customers since 2019. The Bentonville, Arkansas-based retailer recently expanded that relationship by introducing Affirm as a payment option at Walmart self-checkout machines.
It also likely suggests a battle is brewing in the store aisles and e-commerce portals of America’s largest retailer. At stake is the role of a wide range of players, from fintech companies to card companies to established banks.
One’s foray into lending is the clearest sign yet of its ambition to become a financial superapp, a mobile one-stop shop for saving, spending and borrowing money.
Since it came onto the scene in 2021, tempting Goldman Sachs With long-time CEO Omer Ismail as CEO, the fintech startup has intrigued and threatened a financial landscape dominated by banks – poaching talent from more established lenders and payments companies.
But the company, based in a cramped WeWork space in Manhattan, has operated largely in stealth mode in developing its early products, including a debit account launched in 2022.
Now One is competing against some of Walmart’s existing partners, including Affirm, which helped the retail giant generate $648 billion in sales last year.
Walmart’s fintech startup One now offers BNPL loans in Secaucus, New Jersey.
Hugh son | CNBC
During a recent visit by CNBC to a Walmart location in New Jersey, ads for One and Affirm vied for attention among the Apple products and Android smartphones in the store’s electronics section.
Offers from One and Affirm were available at checkout, and loans from both providers were available for purchases ranging from about $100 to several thousand dollars, with annual interest rates ranging from 10% to 36%, according to their respective websites .
Electronics, jewelry, power tools and car accessories are eligible for the loans, but food, alcohol and weapons are not.
“Buy now, pay later” is becoming increasingly popular among consumers for both everyday items and larger purchases. According to Adobe Analytics, BNPL generated $19.2 billion in online spending from January to March this year. This is an increase of 12% compared to the previous year.
Walmart and One declined to comment for this article.
Who stays, who goes?
One’s growing role at Walmart raises the possibility that the company could force Affirm to Capital one and other third parties from some of the most sought-after partnerships in American retail, according to industry experts.
“I have to imagine the goal is to have all of these things, be it a credit card, buy now, pay later loans or transfers, bring everything together in one app under a single brand, online and through Walmart’s physical presence “said Jason Mikula, a consultant who formerly worked in Goldman’s consumer division.
Affirm declined to comment on its Walmart partnership. Shares of Affirm rose 2% on Tuesday, recovering after falling more than 8% in the premarket.
For Walmart, One is part of a broader effort to pursue new revenue streams beyond its retail stores in areas such as finance and healthcare, following rivals Amazon’s Playbook with cloud computing and streaming, among other things. Walmart’s newer stores have higher margins than retail and are part of its plan to grow profits faster than sales.
In February, Walmart said it was buying television maker Vizio for $2.3 billion to boost its advertising business, another growth area for the retailer.
“Bank of Walmart”
When it comes to finance, One is just Walmart’s latest attempt to break into banking. Beginning in the 1990s, Walmart made repeated attempts to enter the industry through a direct stake in a banking division, but each time it was blocked by lawmakers and industry groups that feared a “Bank of Walmart” would break up small lenders and squeeze large ones.
To address these concerns, Walmart took a more independent approach this time. For One, the retailer formed a joint venture with investment firm Ribbit Capital, known for backing fintech companies Robin Hood, Credit Karma and Affirm – and filled the company with executives from across the financial sector.
Walmart has not disclosed the size of its investment in One.
The startup said it makes decisions independently of Walmart, although its board includes Walmart US CEO John Furner and CFO John David Rainey.
It doesn’t have a banking license, but it works with Coastal Community Bank for debit card and installment loans.
After its failed first attempts at banking, Walmart pursued a partnership strategy, partnering with a constellation of providers including Capital One, synchronicity, MoneyGram, Green Dotand more recently Affirm. With the help of partners, the retailer opened thousands of physical MoneyCenter locations in its stores to offer check cashing, sending and receiving payments, and tax services.
From paper to pixels
But Walmart and One executives have made no secret of their ambition to become a major player in the financial services sector by overtaking existing players with clear success.
One’s no-fee approach is particularly relevant to low- and middle-income Americans who are “financially underserved,” according to Rainey, a former PayPal CEO, noted during a conference in December.
“We see a lot of these customer groups, so I think it gives us an opportunity to be involved in this space in a way that others might not,” Rainey said. “We can digitize many of the services we provide physically today. One of them is the platform for this.”
It says debit cards and loans could generate about $1.6 billion in annual revenue in the near future, and more than $4 billion if it expands into investments and other areas Morgan Stanley.
Walmart can use its size to expand One in other ways. It is the largest private employer in the U.S. with about 1.6 million employees and already offers its workers early access to wages when they sign up for an enterprise version of One.
Walmart’s next card
There are signs that One is making more inroads into lending beyond installment loans.
Walmart recently prevailed in a lawsuit against the company Capital one, allowing the retailer to end its credit card partnership years earlier than planned. Walmart sued Capital One last year, arguing that its exclusive partnership with the card issuer was void because the company had failed to meet its contractual obligations regarding customer service. Capital One denied these claims.
The lawsuit led to speculation that Walmart intends for One to take over management of the retailer’s co-branded and loyalty cards. In fact, Capital One itself claimed in legal filings that Walmart was less about handling complaints and more about shifting transactions to a company it owns.
“Upon information and belief, Walmart intends to offer its branded credit cards through One in the future,” Capital One said last year in response to Walmart’s lawsuit. “One positions Walmart to compete directly with Capital One in providing credit and payment products to Walmart customers.”
A Capital One Walmart credit card sign is seen at a store in Mountain View, California, U.S., on Tuesday, November 19, 2019.
Yichuan Cao |. Nurphoto |. Getty Images
Capital One said last month that it could appeal the decision. The company declined further comment.
Meanwhile, Walmart said last year when its lawsuit became public that it would soon announce a new credit card option with “significant benefits and rewards.”
It has obtained lending licenses that allow it to operate in almost every U.S. state, according to filings and its website. The company’s app tells users that credit building and credit monitoring services are coming soon.
Catching Cash App, Chime
And while One’s expansion threatens to displace Walmart’s existing financial partners, Walmart’s efforts could also be viewed as defensive.
Fintech players included blocks Cash App, PayPal and Chime dominate account growth among people switching banks and have made inroads into Walmart’s core demographic. According to data and consulting firm Curinos, the three services accounted for 60% of digital gamer sign-ups last year.
But One has the advantage of being majority owned by a company whose customers make more than 200 million visits per week.
It can offer them enticements including 3% cash back on Walmart purchases and a savings account that pays 5% interest annually, far more than most banks, according to customer emails from One.
These terms help customers spend and save money within the Walmart ecosystem and help the retailer understand them better. Morgan Stanley analysts said in a 2022 research note.
“It has access to Walmart’s large and stable customer base, the largest in retail,” the analysts wrote. “This captive and underserved customer base gives One a leg up on other fintechs.”
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2024-04-23 15:51:01
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