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US retailer Walmart has announced its intention to launch a financial technology (fintech) startup in partnership with a specialist investment company.
The fintech, created in partnership with Ribbit Capital, will offer financial services geared towards the retailer’s customers and employees.
Walmart said the development is in reaction to customer demand. “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,” said John Furner, CEO at Walmart US. “And they’ve made it clear they want more from us in the financial services arena.”
The retail giant, which generated $524bn in sales last year, will take majority ownership in the fintech, which will build a management team of experienced fintech executives. The company said acquisitions and partnerships are on the cards as part of the plan.
Walmart said it will retain the financial services it already offers, such as Walmart Credit Card, Walmart Money Card, check cashing, money transfers and instalment financing.
The fintech’s initial challenge is to acquire large numbers of customers, which Walmart already has in the retail space. The combination of its huge customer base and the fintech knowledge of Ribbit Capital could generate a large user base to build on.
Meyer Malka, managing partner at Ribbit Capital, said: “Walmart has a relationship with millions of customers and associates built on trust, security and integrity. 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.”
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David Bannister, wholesale banking analyst at Aite, said that although many retailers offer financial services, this is normally done through a traditional bank.
Retailers have the potential to link purchases with other services, he said. “For example, if you buy a washing machine, it could also be added to home and contents insurance if you have a policy with the retailer.”
Bannister added that there is plenty of room for fintech expansion in the US and it could be interesting to see what a company as big as Walmart does, particularly because the US is generally behind Europe in terms of the use of fintech services such as digital payments.
The Covid-19 pandemic offers fintechs and retailers the opportunity to develop digital services in the knowledge that customers, currently restricted in their movements due to lockdown rules, are increasingly looking for digital alternatives to everyday services.
For example, there has been a a rise in demand for digital banking services during the lockdowns as consumers and businesses seek different ways to access services and make them available. Once people get used to using alternative payment methods, such as mobile wallets and contactless cards, they are unlikely to go back to cash.