WORKWEEK

Walmart has been interested in fintech for decades—the retailer pursued getting a bank charter in 2005, as a way to cut card processing fees and move them in-house. 

Now, with the proliferation of digitally native financial services products, Walmart is hoping to use a tried-and-true playbook to launch a consumer fintech startup majority owned by Walmart. 

This all started in January 2021, when Walmart announced a new startup coowned by Ribbit Capital focused on changing fintech for Walmart employees and shoppers. My interest in the project has been piqued since then—sure Walmart’s a big deal, but Ribbit’s involvement was arguably more interesting. Ribbit’s one of the strongest fintech investors in the ecosystem, and one of the most knowledgeable venture team in the space. By leveraging Walmart’s inherent advantages around brand trust and distribution to employees and shoppers, and combining it with Ribbit’s expertise, it was definitely a project to keep an eye on. 

But, for the last 2 years or so, there haven’t been much about the startup. The company acquired One, a fintech startup that helps offer banking products at lower fees, and Even, a fintech startup that helps businesses offer same-day paychecks for employees. Walmart was a big customer for Even, and offered it for free for all employees. The other thing that was pretty well known was that Walmart was hiring a bunch of ex-Goldman folks to run the project, particularly those focused on building Marcus, Goldman’s digital consumer bank. 

Strategically, Marcus and One are really similar—neither Goldman nor Walmart had a robust consumer-focused banking product. Before the rise of fintech, banking grew off the back of bank branches; with Marcus and One, incumbents are realizing they can bypass acquiring that bulky, expensive, physical infrastructure and offer banking services over the phone instead. 

And strategically, while Goldman’s brand is massive, Walmart’s might be bigger. Walmart’s the world’s largest private employer, with 1.6 million people under employment, and says 90% of American households are within 10 minutes of a Walmart. 

Here’s what I found interesting about Walmart’s new fintech offering:

Proximity To Americans & Future Of Community Banking

Being so close to so many Americans is a really unique position: Walmart has 5300 stores, which would be a much larger banking footprint than the top 4 banks combined. In an old press release, Walmart said they have 100 million plus shoppers weekly. And while neobanks are getting more verticalized and narrow over time, no one’s really focusing on being physically close to people. It remains to be seen how beneficial that will be when it comes to customer acquisition, but I’m sure a large segment of users will be attracted to potential physical locations to do things like cash checks or deposit funds. 

Walmart exec’s think that they’ll be much more efficient at customer acquisition, according to Bloomberg, ““Given the eyeballs that we have and the number of people who transact with us every week, customer-acquisition cost is actually something we already bring to the table,” Brett Biggs, then Walmart’s chief financial officer, said at an investor conference in March. “We should have lower customer-acquisition costs than other companies like that.”

This could also be a boon to attract underbanked customers too—FiveThirtyEight notes there are more Walmart’s in areas with more underbanked Americans. 

Bank For Employees

Employer-driving financial services has been taking off over the past few years, albeit quietly. For a lot of companies, like Walmart, the ability to provide banking services for your employees can be a huge factor for employee retention. 

Walmart’s been testing this for quite some time: there are articles back in 2014 that show Walmart was testing partnerships to bring banking services to their employees. Owning this banking relationship to better cater and develop these services makes sense—embedding things like no-fee payroll and having people access funds after their shifts can make a huge difference in someone’s financial life. 

I think there’s more potential to change financial services for employees than shoppers—Walmart sitting in the flow of funds and distributing salaries means their more involved in the transaction, and therefore can improve upon it more directly. Borrowing off of someone’s salary, getting access to payroll faster, verifying employment history and data when employees go to borrow more capital…there are a plethora of ideas to explore. 

Brand Trust

This can’t be underemphasized: I think Walmart’s popular and approachable brand will be a big help here. While historically, Walmart’s brand in local communities was a bit touch-and-go, Walmart’s become an engrained staple in American communities. Most people trust and know Walmart and like the simplicity and transparency that Walmart can bring. This may not seem like a big deal, but a user’s relationship with a banking institution is critical: users don’t feel comfortable signing up for random brands they don’t know or trust, and Walmart won’t run into any of those problems. 

So, what does Walmart bring to the table? Brand trust, which is critical and hard to replicate; access to 100 million plus shoppers, many of whom are unbanked; and employees, and with Walmart’s role as the world’s largest employer, that’s a massive potential audience as well. Most fintech startups don’t have any of these 3 advantages, much less all 3, and a 200+ team and $250 million in capital as well.

The hardest part is creating the right product for users: employees will be focused on accessing wages and potentially could use Walmart as their primary bank. Walmart shoppers will want to tie their Walmart purchases, and potentially purchases at other stores, There are a lot of reasons to be bullish on Walmart’s fintech project, but I think the combination between these advantages, plus the team they’ve assembled, puts the startup in a good position as it gets ready to launch a beta program.