Customers shop at a Walmart Supercenter on February 20, 2024 in Hallandale Beach, Florida.

Joe Raedle | News Getty Images | Getty Images

It also likely signals that a battle is brewing in the store aisles and e-commerce portals of America’s largest retailer. At stake is the role of a broad spectrum of players, from fintech companies to card companies and established banks.

One’s push into lending is the clearest sign of its ambition to become a financial superapp, a mobile one-stop shop for saving, spending and borrowing money.

From that moment burst on the scene in 2021, attracting Goldman Sachs veteran Omer Ismail as CEO, the fintech startup intrigued and threatened a financial landscape dominated by banks – and poached talent from more established lenders and payments companies.

But the company, based in a cramped WeWork space in Manhattan, operated mostly in stealth mode during initial development productsincluding a debit account released in 2022.

Now, One is going up against some of Walmart’s existing partners like Affirm, which helped the retail giant generate $648 billion in revenue last year.

One, Walmart’s fintech startup, now offers BNPL loans in Secaucus, New Jersey.

Ugo Figlio | CNBC

In a recent CNBC visit to a Walmart location in New Jersey, ads for both One and To assert Apple products and Android smartphones competed for attention in the electronics section of the store.

Offers from both One and Affirm were available at checkout, and loans from both providers were available for purchases starting at around $100 and costing up to several thousand dollars with an annual interest rate of between 10% and 36 %, according to their respective websites. .

Electronic devices, jewelry, power tools and automotive accessories are eligible for loans, but groceries, alcohol and weapons are not.

Buy now, pay later has gained popularity among consumers for everyday items and larger purchases. From January to March of this year, BNPL generated $19.2 billion in online spending, according to Adobe Analytics. This is a 12% increase year over year.

Walmart and One declined to comment for this article.

One’s expanding role at Walmart raises the possibility that the company could force Affirm, 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 this stuff, whether it’s a credit card, to buy it now, to pay loans or remittances later, to have it all unified in one app under one brand , delivered online and through Walmart’s physical footprint,” he said Jason Mikulaa consultant previously employed in Goldman’s consumer division.

Affirm declined to comment on its partnership with Walmart. Affirm shares rose 2% on Tuesday, rebounding after falling more than 8% in premarket activity.

For Walmart, One is part of its broader effort to develop new sources of revenue beyond its retail stores in areas such as finance and healthcare, tracking the competition From Amazon playbook with cloud computing and streaming, among other segments. Walmart’s new businesses have higher margins than retail and are part of its plan to grow profits faster than sales.

In February, Walmart said it would buy television maker Vizio $2.3 billion to boost its advertising business, another growth area for the retailer.

When it comes to finance, One is just Walmart’s latest attempt to get into the banking industry. Starting in the 1990s, Walmart made repeated Efforts to enter the sector through direct ownership of a banking arm were each time blocked by lawmakers and industry groups worried that a “Bank of Walmart” would crush small lenders and squeeze the big ones.

To circumvent these concerns, Walmart took a more distanced approach this time. For one, the retailer created a joint venture with investment firm Ribbit Capital, known for backing fintech companies, including Robin Hood, Credit Karma and Affirm – and have staffed the company with executives from across the financial industry.

Walmart did not disclose the size of its investment in One.

The startup said it makes decisions independently of Walmart, although its board includes Walmart’s U.S. CEO, John Furner, and its finance chief, John David Rainey.

You don’t have a banking license, but you work with Coastal Community Bank for debit cards and installment loans.

After initial failed attempts in banking, Walmart pursued a partnership strategy, working with a constellation of vendors, including Capital One, Synchrony, MoneyGram, Green Dotand, more recently, Affirm. Leaning on partners, the retailer has opened thousands of physical MoneyCenter locations within its stores to offer check cashing, sending and receiving payments and tax services.

But executives at Walmart and One have made no secret of their ambition to become a major player in financial services by leapfrogging existing players in a clean sweep.

The no-cost approach is especially relevant to low- and middle-income Americans who are “financially underserved,” Rainey, a former PayPal executive, he noted during a December conference.

“We see a lot of this customer demographic, so I think it gives us a chance to participate in this space maybe in a way that others don’t,” Rainey said. “We can digitize many of the services that we physically perform today. One is the platform for that.”

It could generate about $1.6 billion in annual revenue from debit cards and loans in the near term, and more than $4 billion if it expanded into investing and other areas, the survey found. Morgan Stanley.

Walmart can use its size to grow One in other ways. It is the largest private employer in the United States with about 1.6 million employees and already offers its workers early access to wages if they sign up for a corporate version of One.

There are signs that One is making a deeper push into lending beyond installment loans.

Walmart recently prevailed in a legal dispute with Capital One, allowing the retailer to end its credit card partnership years earlier than expected. Walmart sued Capital One last year, arguing that its exclusive partnership with the card issuer was void because it failed to meet contractual customer service obligations, claims Capital One denied.

The lawsuit has led to speculation that Walmart plans to have One take over management of the retailer’s co-branded cards and store. Indeed, in legal documents, Capital One itself said that Walmart’s rationale was less to respond to complaints and more to move the transactions to a company it owns.

“On information and belief, Walmart intends to offer its One through One branded credit cards in the future,” Capital One said last year in response to Walmart’s lawsuit. “With One, Walmart is positioned to compete directly with Capital One to provide credit and payment products to Walmart customers.”

Capital One Walmart credit card sign at a store in Mountain View, California, United States, Tuesday, November 19, 2019.

Yichuan Cao | Nurphoto | Getty Images

Capital One said last month it might appeal the decision. The company declined to comment further.

Meanwhile, Walmart She said last year, when his lawsuit became public, he would soon announce a new credit card option with “significant benefits and rewards.”

One has obtained lending licenses that allow it to operate in nearly every U.S. state, according to filings and related documents website. The company’s app informs users that credit strengthening and credit score monitoring services will be available soon.

And while One’s expansion threatens to displace Walmart’s current financial partners, Walmart’s efforts could also be seen as defensive.

Fintech players included Of block Cash App, PayPal and Chime dominate account growth among people switching bank accounts and have made inroads into Walmart’s core demographic. According to data and consultancy firms, the three services accounted for 60% of digital reader subscriptions last year Curino.

But One has the advantage of being owned by a company whose customers make more than 200 million visits a week.

It can offer them incentives including 3% cash back on Walmart purchases and a savings account that pays interest of 5% annually, much higher than most banks, according to emails from One customers.

These terms keep customer spending and saving within the Walmart ecosystem and help the retailer better understand them, Morgan Stanley the analysts said in a 2022 research note.

“You have access to Walmart’s sizable and established customer base, the largest in the retail industry,” the analysts wrote. “This captive and underserved customer base gives One an advantage over other fintechs.”

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