Walmart takes its commitment to financial technologies to the next level

FACTS

• US retail giant Walmart is attracting the attention of investors and financial players around the world by announcing its intention to launch its own FinTech.

• In the wake of this announcement, its share price rose by 1.5% in trading after the close.

• To launch this new player, in which Walmart will have a majority stake in terms of capital, the retailer has partnered with Ribbit Capital, a Silicon Valley-based venture capital fund specializing in FinTech. Its portfolio includes leading players such as Robinhood, Nubank, Vivid Money, Credit Karma, Affirm and Coinbase.

• The new start-up that will emerge from this partnership is expected to offer digital financial products that are qualified as affordable and innovative by both partners. In reality, no details have been revealed yet on the content of the offer.

• The growth of this FinTech in gestation could rely on partnerships, but also on existing FinTech acquisitions.

• In this partnership, Walmart will bring its sales expertise and its knowledge of its customers' behavior, including financial; while Ribbit Capital will bring its in-depth knowledge of the American FinTech market.

CHALLENGES

• Pushing its position in FinTech even further: although the retailer has not communicated any details, this announcement evokes a rather voluntarist stance, insofar as Walmart has already been working closely with FinTech players for several years. Launching its own structure confirms these ambitions, as well as the choice of a partner who is very familiar with this market and who has financed some of the greatest successes on the American market.

• Accompanying a very voluntarist digital strategy: Walmart is one of the retailers who have invested heavily in digital. As a result, the company has coped well with the consequences of the coronavirus. The publication last November of its third quarter 2020 results showed very strong growth in e-commerce (+79% compared to 2019). More generally, its revenues grew by 5.2% to $134 billion.

MARKET PERSPECTIVE

• Walmart already has a strong presence in financial services through debit and credit cards, money transfer, consumer credit and split payment. But the retailer has distinguished itself by choosing to work with a FinTech, starting in 2019, to manage its instalment payment solution (Affirm, which is also in Ribbit Capital's portfolio). The retailer also launched a start-up accelerator in November 2019.

• Walmart has also massively explored new ways of business, testing a number of services such as insurance and healthcare products. The retailer even positioned itself at the end of 2020 for the acquisition of TikTok's US subsidiary, which also matches its digital investment strategy.

• This announcement is also part of a particular context. In the United States, commerce and banking have long remained separate. It is only recently that the FDIC has changed the American regulations to allow non-financial companies to apply for a banking license. In this context, Rakuten should be one of the first retailers in the territory to take advantage of it. By working on a recurring basis on these services, with partners, Walmart has therefore long been an exception and a precursor.

• Finally, Walmart's customer profile is also adapted to this strategy. In particular, the retailer is very present in rural areas, with a rather low price positioning. A number of its customers are un- or under-banked and use Walmart's financial services in particular as an alternative to traditional banking services.

KEY FIGURES

• More than 265 million visitors each week
• Approximately 11,400 stores managed under 55 banners worldwide
• 4,700 Walmart stores in the United States
• 26 countries covered
• More than 2.2 million employees worldwide