The world’s largest retailer plans to offer financial services with an independent fintech venture and the newly-hired Goldman bankers to spearhead the startup. Let’s understand what these moves mean for Walmart as it enters the banking business.
Walmart has recently welcomed two key executives from Goldman Sachs’ fintech unit, Marcus. Veterans Omer Ismail and David Stark will help Walmart run its new fintech startup. They have played a crucial role in leading Marcus’ growth to more than $97 billion in deposits. The news came just over a month after the retailer announcedOpens a new window it would launch a fintech venture with investment firm Ribbit. This strategic partnership was aimed at offering modern, innovative, and affordable financial solutions.
Recent announcements from Walmart hint at the retailer’s plans to create a financial technology or fintech business unit. The company’s outlook is to go beyond retail to drive revenue through fintech ventures. Hence, Walmart is putting money and muscle behind its financial services ambitions.
However, the reality is that Walmart’s bank has been around for a long time. For years, Walmart has offered prepaid debit cards, domestic and international money transfers, bill pay services, tax preparation, and installment financing. Besides, the retailer also offered other financial services through its partnerships with Green Dot, NetSpend, American Express, MoneyGram, PayPal, Jackson Hewitt, and other providers.
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Walmart Super App on the Cards?
Walmart is eyeing the launch of a larger digital ecosystem in the form of a super app rather than just a digital bank. When Walmart reported its Q4 2020 earnings, CEO Doug McMillon describedOpens a new window a “super†concept at the center of Walmart’s future: the “super app.â€
Walmart’s super app is much more than just the integration and digitization of its financial services business. The super app will integrate Walmart’s Shopify marketplace, Connect ad platform, health centers, existing investments in ecommerce, logistics, supply chain, and inventory management. The app will also feature products and services that aren’t affiliated with Walmart currently.
Walmart’s Prospects for a Super App in the U.S.
Industry structure and consumer behavior are the two factors that have prevented the development of super apps in the U.S. However, Walmart may not face any such obstacles because of two main reasons. Â
1. Underserved customer base
Practically, every U.S. resident shops at Walmart. The company’s core segment, which includes non-urban and low to middle-income consumers, is often underserved. In 2020, there were approximately 265 millionOpens a new window customer visits each week to Walmart stores throughout the world. Despite the pandemic, Walmart recorded fascinating numbers globally. This number only catalyzes Walmart’s future prospects for the super app.
Average Number of Weekly Customer Visits to Walmart Stores Worldwide (2017 to 2020)
Source: StatistaOpens a new window
2. Strong initiativeÂ
Walmart’s initiative of building a super app is backed by decades of experience in building an integrated, cross-industry supply chain. It intends to reinvent the way goods and services are provided to low to middle-income consumers via the super app. The idea may just resonate in the minds of the new Goldman hires. However, the super app’s success will be determined by how it benefits low to middle-income consumers.
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Experts Predict Walmart’s Fortunes
Walmart declined to comment on the recent hirings or its fintech venture. However, experts saidOpens a new window that fintech could provide key opportunities for Walmart and open the door to some risk. They were not sure of Walmart’s intentions behind these recent fintech moves. But the overall consensus was that through this new venture with Ribbit, Walmart now has the ability to build a formidable fintech.Â
Walmart can even become a bank through a charter at some point in the future. There’s a possibility of the retailer competing more directly with the country’s largest financial institutions. Walmart records more than 200 million customer visits weekly. Considering these numbers, an obvious question arises — how many banks average more than 200 million visits a week? One can only wait and watch whether Walmart will receive a similar customer response for its fintech.
In conclusion
Walmart’s fintech aspirations are on the line as the retailer dives deep into its new fintech venture with Ribbit. New hires feature the efforts taken by the retailer to get a headstart around consumer-focused banking services. The steps taken by the investment bank do not just scratch the surface of the fintech space but clearly indicate the bank’s intentions of extending its outreach and growing beyond its traditional strengths.
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