Will becoming a fintech powerhouse make Walmart an even more formidable retailer?

Discussion
Source: Walmart
Jan 12, 2021
George Anderson

Walmart announced yesterday that it is creating a new fintech startup with Ribbit Capital, a venture capital firm in the space, with an eye toward developing and automating “tech-driven financial experiences tailored to” the needs of its customers and associates.

The retailer, which will hold a controlling interest, did not disclose the new venture’s name nor when it will make its services available. The fintech’s board will be made up of Walmart executives John Furner, president and CEO of the retailer’s U.S. business, and Brett Biggs, chief financial officer. Meyer Malka, managing partner at Ribbit, will be the third member. Plans are in place to add other industry experts from outside to the board. The startup plans to assemble a management team of experienced leaders in the fintech sector and expects that it will grow through partnerships and acquisitions.

“For years, millions of customers have put their trust in Walmart to not only save them money when they shop with us but help them manage their financial needs. And they’ve made it clear they want more from us in the financial services arena,” said Mr. Furner in a statement.

“When we combine our deep knowledge of technology-driven financial businesses and our ability to move with speed with Walmart’s mission and reach, we can create and deliver financial offerings that are second to none,” said Ribbitt’s Malka.

Walmart is not a newbie to financial services. The retailer has partnered with third parties to offer services, oftentimes geared to the unbanked, including check cashing, installment financing, money transfers and Walmart-branded credit and prepaid debit cards. Walmart had explored making industrial bank acquisitions in the past, but has been rebuffed by state and federal legislators concerned about its impact on the marketplace.

DISCUSSION QUESTIONS: Do you expect Walmart’s new venture with Ribbit Capital to turn the retailer into a driving force in the fintech sector? What do you think this may mean for Walmart’s associates, customers and its retail rivals?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Sounds like a potential competitive edge against Amazon — right up to the moment that Amazon makes a similar announcement. "
"One might say, what took Walmart so long to connect the dots? Great news for the 265 million customers Walmart serves globally each week!"
"When you are Walmart the problem is, how do you invent the equivalent of a small new industry every year to keep the analysts happy?"

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15 Comments on "Will becoming a fintech powerhouse make Walmart an even more formidable retailer?"


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Neil Saunders
BrainTrust

From what Walmart has said on this, it seems that their focus is on providing a range of financial products to existing shoppers. There is some potential demand there as their core customers are generally “underbanked.” Obviously this will help Walmart strengthen relationships and gather more data and insights. Whether it makes Walmart a powerhouse in the financial services markets remains to be seen, a lot will depend on how much they want to push beyond their traditional customer base.

Gene Detroyer
BrainTrust

Their traditional customer base is limited. There is no future in it. They must move into new areas and mirror or even leap-frog Amazon, Tencent and Alibaba for growth beyond 2 percent or less a year. Their TikTok interest long term isn’t about selling more stuff, it is all about being involved in a technology that is a generation ahead of Facebook and perhaps evolving it into the next Facebook.

Chuck Ehredt
BrainTrust

The payment experience is critical to building preference among customers, so investing in payment innovation is a wise move for a retailer with the scale of Walmart. Given their loyal following among certain customer segments, there will also be plenty of additional fintech opportunities to grow total customer share-of-wallet.

Additional value-added services could include insurance products, investment products, savings products, etc. The more touchpoints a brand has with customers the better they are likely to understand customer needs and have the opportunity to meet them.

It will be interesting to see if Walmart and Ribbit try to deliver their own solutions or aggregate best-in-class solutions from third parties.

Oliver Guy
BrainTrust

Across lots of industries there are conversations regarding companies needing to become technology companies to survive. This is driven by the success of new entrants into market being technology companies (Amazon, Tesla, Ocado). Based on this the venture makes a lot of sense.
However when we think back to the early days of e-commerce, some companies set up a separate business to facilitate the move but then later struggled to integrate and incorporate these back into the wider business. I really hope this will not be the case here.

Bob Amster
BrainTrust

Walmart has very deep pockets. When it launches this company, if run by the right people, it will make Walmart a formidable leader in retail and retail innovation. If it doesn’t work, they will sell it or close it and write it off. Walmart can do what not many can.

Gene Detroyer
BrainTrust

What Amazon has proven, and to an even greater degree Tencent and Alibaba, is that success is not about selling stuff but being the portal for life. The more a consumer thinks first about a platform, the more money the platform will generate.

Walmart has a long way to go to match Amazon’s connections to customers, and a longer way to go to be as complete as the Chinese tech powerhouses. But they are thinking in the right direction. The strategy is correct. And I suspect that in Walmart’s long range strategic plans they, like the others, are targeting for less than 50 percent of their revenue and profits coming from selling stuff.

In the U. S. particularly, the population growth rate is about 0.7 percent. If Walmart were to grow in excess of 1 percent or 2 percent they would have to move into business where there is a future.

Jeff Sward
BrainTrust

It’s not surprising that Walmart wants to expand the range of services it offers customers. Sounds like a potential competitive edge against Amazon — right up to the moment that Amazon makes a similar announcement. Is this banking, electronic currency exchange and payments, insurance…? Bottom line, it sounds like they are casting a broader product net to a broader audience. Sounds more formidable to me.

Lisa Goller
BrainTrust

Walmart aligns with 2021 retail strategy trends like partnerships, industry expansion and personalized service.

Moving into fintech helps Walmart gain new tech capabilities, capitalize on its brand reach and gather data insights. Such insights can help Walmart stay agile as consumer trends evolve.

Associates and customers gain more financial choice and this new venture could modernize their banking habits. Rivals may have anticipated this play, as global e-commerce best practices include seamless digital pay like AliPay and WeChat Pay.

Joe Skorupa
BrainTrust

Walmart doesn’t need to become a fintech powerhouse to gain benefits from its venture with Ribbit. What it will gain is serving its broad customer base (and huge employee base) with financial services that are currently offered through third-parties. If anyone has ever had a retail experience serviced by Synchrony Bank (used by many retailers) you will clearly see there is a gap that needs to be filled. And, of course, Walmart will be able to cut out the fees of the middleman.

Ryan Mathews
BrainTrust

When you are Walmart the problem is, how do you invent the equivalent of a small new industry every year to keep the analysts happy? It’s the old rule: There are only two ways to make money at retail – sell stuff to more people, or sell more stuff to the people you have. I’m not sure where Walmart is going to find “more people” without jeopardizing its base business, so the only option is to find new things to sell to their existing customers. Will it work? Who knows. Will others copy it? Probably only Amazon, somewhere down the road.

Gene Detroyer
BrainTrust

That is exactly correct. There are no more people. But also what people can buy is limited. Walmart’s future is to build a platform where people go first for anything from shopping, to finances, to social media, to movies … maybe even autonomous vehicles.

Doug Garnett
BrainTrust

Yes, this appears to be smart for Walmart. But I don’t see any evidence it goes beyond that. The idea that it’s “tech driven” is yet another example of shiny bauble distraction.

Putting banking in the store is a tremendous convenience for customers. The idea that this is a disruptive force? Seems Walmart is trying to copy Amazon’s approach to press releases — just make it sound hyped.

Scott Norris
Guest

I’m not seeing the opportunity. A little bit more margin on the money existing customers are already spending in store? They’re not going to be handling mortgages or managing retirement funds, and their customer base doesn’t have a lot in savings — so just skimming a bit of velocity off checking accounts? Also, if they think banking regulation is going to be easy, they’d better check their assumptions again — the Wells Fargo scandal and the incoming Biden administration are headwinds that will only keep growing.

Cynthia Holcomb
BrainTrust

Remember “Layaway?” Layaway helped millions of people in the late ’50s and ’60s make payments on a product they really loved but could not afford outright.

Now years later, Walmart is deeply trusted by its customers based on a number of really important criteria to Walmart customers, beginning with product and pricing.

Walmart is smart to extend financial services to both Walmart customers and Walmart associates; services not likely available or accessible elsewhere.

In comparison, the gigantic Walmart competitor lives in a digital sphere, devoid of the human emotional connection so valuable to the physical world of shopping. So which retailer has better data? Which retailer has the opportunity to know their customer as a human?

One might say, what took Walmart so long to connect the dots? Great news for the 265 million customers Walmart serves globally each week!

Camille P. Schuster, PhD.
BrainTrust

Without knowing what services are being developed, the costs to consumers, and the ease of use, it is difficult to predict success. It is another experiment, so will be interesting to watch as it develops.

wpDiscuz
Braintrust
"Sounds like a potential competitive edge against Amazon — right up to the moment that Amazon makes a similar announcement. "
"One might say, what took Walmart so long to connect the dots? Great news for the 265 million customers Walmart serves globally each week!"
"When you are Walmart the problem is, how do you invent the equivalent of a small new industry every year to keep the analysts happy?"

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