Walmart’s Fintech Startup Is Expected to Pack A Potent, Low-Cost Punch

Unlike many fintech startups, Walmart’s Inc.’s new financial company is expected to be a formidable player right out of the gate. The retail giant unveiled plans late Monday to partner with Ribbit Capital to create a fintech that will provide what Walmart describes as “modern, innovative, and affordable financial solutions.”

Walmart, which will own the majority of the unnamed entity, will have a readymade customer base through the giant retailer’s millions of customers and employees, payment experts say. More than 265 million customers and members visit Walmart stores in 26 countries, in-store as well as via Web sites. The retailer also employs more than 2.2 million workers worldwide.

“What makes the announcement so significant is Walmart’s scale—they will instantly pose formidable competition, and their low-cost retail reputation is a model of what their product offerings will be like,” Greg McBride, chief financial analyst for Bankrate.com, says by email. “Most fintech startups are starting from scratch, but this one won’t be. Walmart has 4,700 stores and 1.5 million employees in the [United States], not to mention tens of millions of customers that represent the target market of their fintech offering.” 

Walmart says it partnered with Ribbit because of its fintech expertise. Ribbit’s investment portfolio includes the no-fee mobile-investment platform Robinhood, consumer-technology platform Credit Karma, and Affirm, which provides innovative payment options for customers. Ribbit was founded in 2012 with the goal of investing in entrepreneurs in financial services.

“We know that we have an opportunity to create a suite of digitally enabled financial products that are tailored to the unique needs of our customers and associates,” a Walmart spokesperson says by email. “We’ll be able to move fast to create solutions in retail and beyond.”

With Walmart declining to provide any further details about potential products, speculation is swirling about the direction the new company will take. The retailer already offers myriad financial services to its customers and employees, including its Walmart Money Card with Green Dot Corp. and the Bluebird Card with American Express Co. In addition, Walmart offers check cashing, money transfers, installment financing, and its Walmart credit card through partnerships with third parties, all of which the retailer says it will continue to support. 

“It will be interesting to see which direction the company chooses to go,” says Ben Jackson chief operating officer for the Innovative Payments Association, a Washington, D.C.-based trade group, by email. “Does it build out in the credit arena, following Ribbit’s earlier investments in Affirm and Credit Karma? Does it dip it’s toe in investing, like Robinhood, and try to win young, upwardly mobile people? Or does it try to build a new, all-in-one app that would provide a digital option for its in-store money centers?”

Whatever services Walmart’s fintech does offer, they are certain to be low-cost, says McBride.

Walmart’s new fintech venture is not the first time the retailer has attempted to create a financial-services subsidiary. In 2005, the merchant applied to establish an industrial loan company, largely to lower its cost in processing card transactions at its stores. The move unified banks and anti-Walmart forces to pressure legislators at state and federal levels to take steps to block the move.  

For now, creating a fintech seems to be a less controversial way for Walmart to push deeper into financial services. “With the rise of fintechs, it is possible to offer a wider variety of financial tools without holding a banking charter directly,” Jackson says.