Cars will 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 start-up with Ribbit Capital, one of the venture capital firms behind Robinhood.
The big box retailer did not share the name of the new company and did not say when its services will be available. It said it will develop unique and affordable financial products for Walmart employees and customers.
Shares were up more than 2% on the news while trading after hours Monday. Walmart’s market cap is $ 416.7 billion.
The fintech startup will be majority-owned by Walmart and its board of directors will include several business leaders, including Walmart Chief Financial Officer Brett Biggs and US CEO John Furner. It said it will also appoint independent industry experts to the board and potentially acquire or collaborate with other fintech companies.
“Millions of customers have relied on Walmart for years to not only save them money when they shop with us, but to help them manage their financial needs,” Furner said in a release. “And they have made it clear that they want more from us in the field of financial services.”
With more than 4,700 stores nationwide, Walmart interacts with millions of customers every year, including some who have no relationship with a bank or financial advisor.
According to the Federal Reserve, six percent of adults do not have a checking account, savings account, or money market account. About 16% are “underbanked”, meaning they have a bank account but also use alternative financial services such as money order. Those Americans are more likely to be inclined to short-term fixes, such as a pawn shop or a flash loan, which can lead to additional fees or high interest charges.
Walmart already offers some financial services for customers. For example, it has Walmart MoneyCard, a prepaid debit card that customers can recharge with cash and use for purchases. The card has a number of features that encourage money management or help people with difficult credit history, such as no overdraft, no monthly fee, and no minimum balance requirement.
The retailer also offers alternative payment plans for customers on a tight budget, such as Layaway and Affirm, a fintech company that allows customers to purchase an online item immediately and pay in installments.
Walmart’s co-owner of the new company, Ribbit Capital, has a history of investing in fintech companies. His portfolio includes Affirm; Robinhood, a start-up at no cost; and Credit Karma, a company that offers consumer-friendly tools such as free credit score checks.