Cars drive past a Walmart store in Washington, DC on August 18, 2020.
Nicholas Kamm | AFP | Getty Images
Walmart said Monday it is creating a fintech startup with Ribbit Capital, one of the venture capital firms behind Robinhood.
The wholesaler did not share the name of the new company or say when its services will be available. It is said that it will develop unique and affordable financial products for Walmart employees and customers.
Shares rose more than 2% on Monday. Walmart’s market capitalization is $ 416.7 billion.
The start-up of fintech will be majority owned by Walmart and its board of directors will include several executives of the company, including Brett Biggs, chief financial officer, and John Furner, CEO of Walmart. It is said that he will also nominate independent experts in the industry and that he can acquire or collaborate with other fintech companies.
“Millions of customers have been relying on Walmart for years to not only save money when they shop with us, but also help them manage their financial needs,” Furner said in a news release. “And they made it clear that they want more of us in the area of financial services.”
With more than 4,700 stores across the country, Walmart interacts with millions of customers annually – including some who do not have a relationship with a bank or financial advisor.
Six percent of adults, according to the Federal Reserve, do not have a check, savings or money market account. About 16% are ‘subbank’, which means they have a bank account but also use alternative financial service products, such as a money order. Those Americans are likely to resort to short-term solutions, such as a pawn shop or a payday loan, which could result in additional costs or high interest costs.
Walmart already provides financial services to customers. It has, for example, Walmart MoneyCard, a prepaid debit card that customers can charge with money and use for purchases. The card has some features that encourage money management or help people who have a challenging credit history, such as no overdraft fees, no monthly fees and no minimum balance requirement.
The retailer also offers alternative payment plans for customers with a limited budget, such as layaway and Klarna, an online financial services option that allows merchants to buy an item immediately and pay in installments.
Walmart’s co-owner of the new company, Ribbit Capital, has a history of investing in fintech companies. The portfolio includes Robinhood, a fee-free investment; Credit Karma, a company that offers consumer-friendly tools such as free creditworthiness checks; and Affirm, a financial lender that offers alternative payment options to customers, such as buying now and paying later.