Fintech One, backed by Walmart, introduces “Buy Now, Pay Later”

Walmart’s fintech startup with a controlling stake One has begun offering “buy now, pay later” credits on big-ticket items at some of the retailer’s more than 4,600 U.S. stores, CNBC has learned.

The move puts One in direct competition with Confirmleader in BNPL and exclusive installment loan provider to Walmart customers since 2019. It’s a partnership the Bentonville, Ark.-based retailer has entered into. extended recently introduced Affirm as a payment option at Walmart self-checkout kiosks.

It also likely signals a battle is brewing on the store shelves and e-commerce portals of America’s largest retailer. The role of a wide range of players is at stake, from fintech companies to card companies and established banks.

The company’s foray into lending is the clearest sign of its ambition to become a financial super app, a mobile one-stop shop for saving, spending and borrowing money.

Since then burst onto the scene in 2021, attracting Goldman Sachs veteran Omer Ismail As CEO, the fintech startup has intrigued and challenged the bank-dominated financial landscape, while also poaching talent from more established lenders and payments companies.

But the company, based in WeWork’s cramped Manhattan space, operated largely behind the scenes as it developed its early iterations. productsincluding a debit account issued in 2022.

Now One is going toe-to-toe with some of Walmart’s existing partners, such as Affirm, which helped the retail giant generate $648 billion in revenue last year.

During a recent visit by CNBC to a Walmart store in New Jersey, One and Confirm Apple products and Android smartphones competed for attention in the store’s electronics section.

Offers from One and Affirm were available at checkout, and credits from any provider were available for purchases starting at $100 and up to several thousand dollars in value, with APRs ranging from 10% to 36%, according to their websites. .

The loans apply to electronics, jewelry, power tools, and auto accessories, but not to food, alcohol, and guns.

“Buy now, pay later” has gained popularity among consumers for both everyday items and large purchases. From January to March this year, BNPL spent $19.2 billion online, according to Adobe Analytics. This is 12% more than last year.

Walmart and One declined to comment for this article.

The growing role of humans at Walmart raises the possibility that the company could force Affirm. Capital One and other third parties ranked among the most desirable partnerships in American retail, according to industry experts.

“I can imagine the goal is to have all of these things, whether it’s a credit card, buy now, pay loans or money transfers later, bring it all together in an app under one brand, delivered online and through Walmart’s physical presence. ” said Jason Mikulaconsultant formerly of Goldman’s consumer division.

Affirm declined to comment on its partnership with Walmart. Affirm shares rose 3% on Tuesday, recovering from a more than 8% decline in premarket trading.

For Walmart, One is part of a broader effort to develop new sources of revenue outside of retail stores in areas such as finance and health care, following its rival. Amazon a collection of games with cloud computing and streaming, among other segments. Walmart’s new businesses have higher margins than retail and are part of the company’s plan to grow profits faster than sales.

In February, Walmart said it was buying TV maker Vizio for $2.3 billion to boost its advertising business, another area of ​​growth for the retailer.

When it comes to finance, One is just Walmart’s latest attempt to get into the banking business. Since the 1990s, Walmart has produced repeated Attempts to enter the industry through direct ownership of a banking unit have each been blocked by lawmakers and industry groups concerned that the “Walmart Bank” would crush small lenders and push out larger ones.

To get around those concerns, Walmart took a more neutral approach this time. For One, the retailer has entered into a joint venture with investment firm Ribbit Capital, known for its support of fintech companies, including Robin Hood, Credit Karma and Affirm — and staffed the business with executives from the financial sector.

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

The startup said it makes decisions independently from Walmart, although its board includes Walmart U.S. CEO John Furner and CFO John David Rainey.

The person does not have a banking license, but partners with Coastal Community Bank for debit card and installment loan.

After unsuccessful early attempts in banking, Walmart implemented a partnership strategy, teaming up with a number of providers, including Capital One, Synchronicity, MoneyGram, Green dot, and most recently Affirm. Leveraging partners, the retailer has opened thousands of physical MoneyCenter locations in its stores, offering check cashing, sending and receiving payments, and tax services.

But Walmart and One executives have made no secret of their desire to become a major player in financial services, leapfrogging existing players and starting with a clean slate.

The no-fee approach is especially relevant for low- and middle-income Americans who are “underserved financially,” says Rainey, a former PayPal leader, noted during the December conference.

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

It is estimated that debit cards and lending could generate approximately $1.6 billion in annual revenue in the near future, and more than $4 billion if it expands into investments and other areas. Morgan Stanley.

Walmart can use its scale to grow One in other ways. It’s the largest private employer in the U.S., with about 1.6 million employees, and already offers its workers early access to wages if they sign up for Enterprise 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, which allowed the retailer to complete its credit card partnership several years ahead of schedule. Walmart sued Capital One said last year that its exclusive partnership with the card issuer was invalidated after the company failed to meet contractual customer service obligations. Capital One denied this claim.

The lawsuit has led to speculation that Walmart intends to give One control of its co-branded brands and retail store maps. In fact, in court papers, Capital One itself argued that Walmart’s motivation was less to service complaints and more to outsource transactions to a company it owns.

“Walmart reportedly intends to offer its branded credit cards through One in the future,” Capital One said last year in response to Walmart’s lawsuit. “With One, Walmart is positioning itself to compete directly with Capital One in providing credit and payment products to Walmart customers.”

Capital One said last month it could address solution. The company declined to comment further.

Meanwhile, Walmart said last year when a lawsuit became public that the company would soon announce a new credit card with “significant benefits and rewards.”

According to documents and reports, the company has obtained lending licenses that allow it to operate in almost every state in the United States. Web site. The company’s app tells users that credit building and credit score monitoring services are coming soon.

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

Fintech players, including Block Cash App, PayPal and Chime dominate account growth among people switching bank accounts and penetrating Walmart’s core audience. These three services accounted for 60% of digital player registrations last year, according to the consulting firm. Kurinos.

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

According to One’s customer emails, it can offer them enticements such as 3% cash back on Walmart purchases and a savings account that pays 5% interest, much higher than most banks.

These terms enable customers to spend and save in the Walmart ecosystem and help the retailer better understand them. Morgan Stanley Analysts said so in a 2022 research note.

“Everyone has access to Walmart’s deep and loyal customer base, the largest in retailing,” the analysts wrote. “This limited and underserved customer base gives One an edge over other fintech companies.”