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Walmart Offering Financial Tools, Fintech PlansLock Icon

7 min read

Walmart insists it doesn’t want to be a bank, but it’s surely acting like one.

Just last month, the Bentonville retailer and world’s largest company relaunched its MoneyCard, a prepaid tool that performs as sort of a checking account, letting customers directly deposit paychecks and offering overdraft protection.

In January, Walmart announced a financial technology startup to “develop and offer modern, innovative and affordable financial solutions,” the company said.

Few details have emerged on the fintech initiative, but President and CEO Doug McMillon told investors in December that the company’s business model is shifting.

“Financial services are an opportunity for us,” he said, according to a transcript of the meeting on Walmart’s website. Also noting opportunities in health and wellness services, he added, “If you just looked at a bar chart of revenue and profit of Walmart, [it] will look different in five years’ time than it looks now.”

Some observers think Walmart is working on a “super app” to tie together health care, retail and financial services for limited-income customers, who tend to be “overlooked and underserved by a lot of industries,” said Ron Shevlin, managing director of fintech research at Cornerstone Advisors of Scottsdale, Arizona.

Walmart’s MoneyCard is issued by Green Dot Corp., a bank holding company based in Pasadena, California. It allows new and existing account holders to use Green Dot’s digital banking services, which are similar to a traditional banking account, Walmart officials have said.

“This is only the latest attempt that they have made to get into financial services,” said Bert Ely, a banking consultant in Alexandria, Virginia. “And, of course, it scares the hell out of the banks.”

Julia Unger, Walmart’s vice president of financial services, told Arkansas Business last week that the company wants to help customers build credit and savings, but has no interest in becoming a traditional bank.

Julia Unger

“We’re currently developing new credit-building capabilities for our customers so they can save money and live better,” Unger said in an email, following up a telephone interview. “We will be sharing more news about products and services as they become available.”

Walmart’s fintech organization will also be looking at banking services for Walmart customers, she said. “At this time, we don’t know what those solutions will be yet.

“The team is being built. … When they’re ready with their strategy they will issue a separate statement.”

About 90% of the U.S. population lives within 10 miles of a Walmart store or Sam’s Club, and 150 million customers visit Walmart or Walmart.com each week, according to the retailer. “They’re certainly taking big strides toward an offering that can appeal to their massive customer base,” said Greg McBride, chief financial analyst at Bankrate.com. “They’re not likely to try to be all things to all people, but they have a very large customer segment that, if they tap into to any extent, will present very formidable competition for traditional banks.”

One company goal is for people using the MoneyCard to build their creditworthiness enough to qualify for Walmart’s other credit products. “We watch them. We monitor them. And we graduate them to our credit portfolios when the time is right, and if they’re interested in doing so,” Unger said.

Walmart offers a credit card in partnership with Capital One and point-of-sale loans letting customers buy now and pay later. The installment financing is offered in partnership with Affirm of San Francisco.

Industrial-Loan Charters

A Federal Deposit Insurance Corp. decision in December allowing industrial-loan charters could make it easier for companies such as Amazon and Walmart to get into banking.

“The true effect of this rule will be to signal that this charter is a viable back-door option for entering the business of banking without the obligations of consolidated supervision by the Federal Reserve,” according to a December news release from the Center for Responsible Lending of Washington, D.C. “It will encourage companies, including Big Tech firms, to acquire ILC charters that will receive the benefits of a bank license, without the federal oversight of the parent company required for traditional banks — posing both consumer protection and systemic risks.”

The U.S. House and Senate Financial Services Committees have closely monitored ILCs, Rep. French Hill, R-Ark., a former banker who serves on the House Committee on Financial Services, told Arkansas Business last week. “It would not surprise me that hearings may be held on that subject to assess this FDIC regulation from December,” he said.

Meanwhile, “nonfinancial companies are evaluating it on how it might fit their future plans,” Hill said.

Moving Into Fintech

In January, Walmart announced it was creating a fintech startup in a partnership with the fintech investment firm Ribbit Capital of Palo Alto, California.

Walmart will be the majority owner of the fintech endeavor, and the retailer expects growth could come through partnerships and purchases of fintech companies.

John Furner, president and CEO of Walmart U.S., said in a news release that millions of customers put their trust in Walmart not only to help save money on retail items but to assist them with their financial needs. “And they’ve made it clear they want more from us in the financial services arena,” he said.

In February, Bloomberg first reported that Walmart had hired two senior Goldman Sachs bankers to help lead its fintech startup. Omer Ismail, the head of Goldman’s consumer bank, and one of his top officers, David Stark, were going to Walmart, Bloomberg reported.

Shevlin, of Cornerstone Advisors, said he thinks Walmart’s hiring of the Goldman executives indicates they are planning something big.

The Goldman Sachs executives helped build Marcus, the online bank that offers savings accounts and loans. Shevlin said he doesn’t think they would leave New York for Walmart to recreate another online bank.

“But if Walmart comes to you and says, ‘Hey, you guys really want to have an impact on society and really do something to support the low- to middle-income consumers in this country, and really do something that uses technology to help them improve their lives?’” Shevlin said.

“Then these guys are gonna say, ‘Yes, I’m on board,’ you know what I mean?”

Walmart’s Furner said at an investor meeting in March that millions of its customers use the retailer’s health care services or order groceries online. “We believe that we have a place where we can offer a suite of financial services done in a modern way, in a modern platform, that can benefit them,” Furner said, according to the transcript posted on Walmart’s website. “And if we have a better way that people can transact with Walmart and also offer other services, we think … we can have a really successful proposition.”

He said there still is a lot of work to figure out the best path to do it. “But whatever it is … the customer will be at the center,” Furner said.

Congressman Hill said the House Financial Services Committee has been “very supportive of fintech innovation, because we think it has great consumer benefits to both businesses and households in terms of better products, lower costs, easier access.”

Green Dot

Walmart first introduced the MoneyCard in 2006. Last month, MoneyCard was offered as a demand deposit account, meaning money could be placed on the card or withdrawn at any time.

Account holders could manage their money through an app or at Walmart’s more than 4,500 locations in the United States.

Unger declined to say exactly how many MoneyCard customers there are, but it’s in the millions. “A lot” of Walmart customers who don’t have credit or debit cards use the MoneyCard as a debit card to shop online or buy services from companies that don’t take cash, such as the ridesharing companies Uber and Lyft, she said.

The MoneyCard’s new feature comes with overdraft protection, so consumers can cover up to $200 for purchases with a direct deposit account.

The card also works as a savings account, and a customer can earn 2% annual interest on up to $1,000. Since MoneyCard’s relaunch last month, Walmart has seen a “huge” number of customers enroll in the debit account, Unger said.

“We’re very pleased with how the program is going,” she said.

Unger said there will be more marketing of the MoneyCard in the coming months. “The MoneyCard is a very important business for us,” she said. “And we’re looking to grow it and scale it and definitely promote it a lot more than we have in the past.”

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