Traditionally, we’ve talked about Amazon, Google, Apple, and Meta (formerly known as Facebook) as big tech companies with the potential to rise up as competitors in the banking and fintech space. However, there is one giant that is worth adding to this list– Walmart.

Walmart is not a fintech company, or even a tech company, it’s a retail firm. Or at least that’s what it was when Sam Walton founded it in 1962. But what does Walmart’s future look like? The company has made it clear that it will not only begin offering financial services, but will also evolve into a super app. On examining the company’s ambitions, it appears that Walmart may have what it takes to ascend as a competitor in the fintech space.

Below are five aspects of Walmart to consider when evaluating it as a potential competitor.

User base

As one of the most recognizable brands across the globe, Walmart comes with a large, built-in user base. The company sees 265 million customers worldwide each week, and many of those shoppers seek out Walmart as their primary retailer. Walmart+, the company’s $99 annual subscription service, counts 32 million members.

Once Walmart begins its formal foray into financial services in earnest, it will certainly not count all 32 million members as users right away. However, having a built-in, captive audience will help jump-start its user base and will lower customer acquisition costs.

In-app rewards

In both retail and financial services sectors, rewards create stickiness. As one of the oldest retail companies, Walmart has figured this out. Leveraging a partnership with Ibotta Performance Network, Walmart recently launched Walmart Rewards, a way for Walmart+ members to earn additional savings toward their future purchases at Walmart.

Checking account

Earlier this month, Bloomberg unveiled that Walmart plans to launch a digital bank account to serve its shoppers and 1.6 million employees. While no specific details have been released, it is clear that the digital bank will stem from One, which Walmart acquired in early 2022. One is a neobank that offers a debit card and boasts non-traditional products and services such as earned wage access, fee-free overdraft protection, and digital wallet integration.

Currently, One relies on Coastal Community Bank to provide banking services. It is not clear whether Walmart will continue to use that model, or if it will seek its own banking license. Walmart initially pursued a banking license in 2005. After two years, the company withdrew its application after receiving opposition from bankers and other credit institutions. Given hurdles involved in earning a banking license, my guess is that Walmart will rely on its relationship with a traditional bank like Coastal Community Bank.

For more clues into Walmart’s banking ambitions, I checked out job advertisements on LinkedIn. Walmart is currently hiring for a range of positions within its financial services arm. “We are starting some exciting ventures as we expand our financial services in various ways to engage and provide capabilities to our customers,” one of the job descriptions states.

Physical presence

Walmart has 11,501 physical retail stores across the globe. The largest U.S. bank, JP Morgan Chase, has fewer than half that number at around 5,080 physical bank branches. And for customers who are not into doing business IRL, Walmart has them covered, as well. The company just launched Walmart Land, a new immersive experience in Roblox.

If Walmart truly wants to become a large competitor in the financial services world, it already has more than enough physical infrastructure to do so.

Part of why this matters isn’t the sheer number of physical locations or square footage. Having these physical stores will impact who Walmart is able to serve, just as much as it will impact how many people it is able to serve. That’s because Walmart stores are typically located in rural and suburban areas– in other words, Walmart stores are close to non-urban customers who may not rely on their mobile devices as much as city dwellers, and therefore may not be comfortable maintaining an account at a digital-only bank. No smartphone? No problem, just drive down to Walmart and open up an account.

Super app

The term “super app” is used quite lightly in the fintech sector these days. However, Walmart is one of the few firms in the U.S. with the potential to evolve into a true super app. In a piece published earlier this year, Chief Research Officer at Cornerstone Advisors Ron Shevlin summarized Walmart’s potential as a super app. “Walmart’s DNA is efficiency and cost control—and that’s the ultimate promise of a super app for the supercenter,” said Shevlin.

Currently, the company’s app offers Walmart+ subscribers online grocery and retail shopping with free shipping; access to Scan & Go, a tool that enables shoppers to scan barcodes as they shop, pay with their phone using their card on file, and scan a QR code at the cash register before they exit the store. Subscribers also benefit from discounts of up to 10 cents off per gallon of fuel at 14,000 gas stations; and free access to stream movies and shows at Paramount+.

As it stands, Walmart’s app with the above services does not constitute a super app. In a blog post last year, I detailed a list of ten elements required for a super app. Here is what Walmart has and where it needs improvement:

• Ecommerce: currently offers
• Health services: currently offers vaccination services and provides medical care at locations in four U.S. states.
• Food delivery: currently offers grocery delivery, but not prepared food delivery
• Transportation services: currently offers fuel discounts and in-app fuel payments
• Personal finance: does not offer, but is actively working on plans to do so
• Travel services: does not offer
• Billpay: does not offer
• Insurance: does not offer
• Government and public services: does not offer
• Social: does not offer

Using that summary, Walmart receives a score of 4.5 out of ten on the super app scale, and it will likely progress in the next few years. Walmart has made it clear that it plans to create a super app. As Omer Ismail, CEO of Walmart’s One, told the Wall Street Journal, the company’s strategy “is to build a financial services super app, a single place for consumers to manage their money.”

Photo by Marques Thomas on Unsplash

Earlier this spring, the U.S. Consumer Financial Protection Bureau (CFPB) announced a new effort to promote competition and innovation in consumer finance. Backing this effort, the CFPB is opening a new office, The Office of Competition and Innovation.

The Office of Competition and Innovation will replace the Office of Innovation, which relied on an application-based process to grant companies special regulatory treatment. The new office takes a much broader approach, and will consider obstructions hindering open markets and learn how large players make it difficult for small companies to operate. Ultimately, The Office of Competition and Innovation aims to make it easier for end consumers to switch among financial providers.

In order to pursue its mission to increase competition, the Office of Competition and Innovation will pursue the following four goals:

1. Make it easy for consumers to switch providers
   When users can switch among financial services providers, there is more pressure on incumbents to offer better services, and new players have a better opportunity to acquire customers.
2. Research structural problems blocking successes 
   The new office will have access to resources to examine what is creating obstacles to innovation. This could impact, for example, the payment networks market or the credit reporting system, both of which are considered oligopolies.
3. Understand the advantages big players have over smaller players 
   Larger players have built-in advantages over small newcomers. As an example, big companies benefit from a large marketing reach, multi-faceted teams, and a built-in customer base. As the CFPB points out, this may threaten new competition.
4. Identify ways around obstacles 
   Obstacles for smaller players include lack of access to talent, capital, or even to customer data. The CFPB is addressing the latter issue via a future open finance rule under Section 1033 of the Consumer Financial Protection Act that will give consumers access to their own data.
5. Host events to explore barriers to entry and other obstacles 
   The new office will organize events such as open houses, sprints, hackathons, tabletop exercises, and war games to help entrepreneurs, small business owners, and technology professionals to collaborate, explore obstacles, and share frustrations with government regulators.

“Competition is one of the best forms of motivation. It can help companies innovate and make their products better, and their customers happier,” said CFPB Director Rohit Chopra. “We will be looking at ways to clear obstacles and pave the path to help people have more options and more easily make choices that are best for their needs.”

In financial services, open finance may be one of the best ways to promote competition. But because the U.S. does not have formal regulation around open banking or open finance, there isn’t enough incentive (yet) for financial services players and third party providers to cooperate when it comes to data sharing. In late 2020, however, the CFPB issued a notice of proposed rulemaking that solicited opinions from stakeholders on how customers’ data should be regulated. This was only a very early step in the process, and industry players still lack a standardized approach to open finance.

Photo by Monstera

You’ve likely heard by now that Apple has taken the veil off of its BNPL tool, Apple Pay Later. The tech giant announced Apple Pay Later at its World Wide Developer Conference on Monday.

If you haven’t read coverage of the announcement yet, here’s the gist– the new tool will enable Apple Pay users to split any purchase made where Apple Pay is accepted into four installments, paid out over the course of six weeks (check out the video announcement at the bottom of this post for more details).

Apple is coming in late to an already over-saturated BNPL market and faces a lot of competition from well-established players. However, the company is not showing up to compete empty handed. Apple Pay Later has a handful of advantages over other contenders.

Advantages

Acceptance at physical retailers
As mentioned earlier, users can pay with Apple Pay Later anywhere Apple Pay is accepted. This includes many physical retailers. And because 90% of retail purchases are made in-store as opposed to online, Apple already covers a lot of territory that other players haven’t been able to access yet. BNPL giant Klarna currently offers in-store services at just over 60,000 retail locations. As a comparison, Apple Pay is accepted at more than 250,000 retail locations.

Underwriting
The success of a BNPL tool not only hinges on retailer acceptance, but also on underwriting. After all, if your users aren’t paying you back, what’s the point?

While Apple is working with Goldman Sachs as the issuer for the Apple Card, the bank will only be involved in offering access to the Mastercard network and won’t facilitate underwriting. However, Apple’s advantage comes in the form of Credit Kudos, a U.K. startup the tech giant bought last year that enables businesses to leverage open banking to assess affordability and risk.

Physical and virtual card
Some BNPL players already offer both physical and virtual payment cards. However, Apple having both will be a leg up for the company. Having both a physical and virtual presence takes up space consumers’ digital and physical wallets, making it more likely to be top-of-mind (and top-of-wallet).

Brand trust and recognition
According to Statista, Apple has the second most valuable brand in the world at $612 billion. This value is driven by having a brand that consumers trust, recognize, and value. It is widely believed that when Apple releases a hardware product, it will be top-notch. Consumers will expect the same from Apple Pay Later, and will therefore be less hesitant to trust the new tool.

What’s missing?

Apple has thought of almost everything when it comes to Apple Pay Later. One thing I’d love to see is a retroactive payment-switching feature similar to Curve’s Go Back in Time. The tool allows users to free up cash by switching payments from one card to another up to 30 days after the purchase was made.

Apple could allow customers to choose to use Apple Pay Later even after a transaction has been completed in order to free up emergency cash flow. While I wouldn’t advise this as a personal finance strategy, it would offer Apple an even greater leg up on BNPL competitors (including Curve’s when it becomes more widely available in the U.S.).

We’ve seen some bad news in the tech sector lately. YCombinator is asking its portfolio founders to “plan for the worst” and prepare for a downturn and Klarna is laying off 10% of its employees. Headlines such as, “Tech’s High-Flying Startup Scene Gets a Crushing Reality Check” aren’t helping consumer or investor sentiment, either. It can be tough to remain optimistic.

The good news is that the fintech industry is resilient. So amid the recent onslaught of disheartening news, here are four reasons you can be optimistic about fintech right now.

DeFi is promising

Fintech’s future is bright, and one shining light is decentralized finance (DeFi). It’s hard to know the exact implications DeFi will have on banks, fintechs, and other traditional financial (TradFi) organizations.

However, it’s clear that decentralizing traditional operations such as money transfers and loans will make a more efficient financial system. What’s more, DeFi is poised to help the 1.7 billion unbanked individuals across the globe benefit from financial services they’ve previously never had access to.

The best innovations are born when times get tough

It’s true that necessity is the mother of invention. Whether it’s an economic downturn, a pandemic, or a crisis in a different form, difficult times have proven to motivate people to develop creative solutions. This can be seen in countless examples from the COVID Recession of 2020. After the COVID pandemic hit, businesses were forced to figure out a way to convert their offering or service into the digital channel. In fact, many fintech companies grew while firms in other sectors were forced to make major cuts.

With new crises come new issues, and new problems that businesses and consumers need help solving. A bear market or an economic downturn would be no different; the best innovations are yet to come.

Still room for improvement

Because the fintech industry is relatively nascent, many of the problems the industry set out to solve still exist. In a piece we published earlier this month titled, “Has Fintech Failed?” we took a look at all of the ways fintech is failing to help consumers and businesses. As a few examples, underbanked populations are still lacking quality financial solutions, there are no open banking mandates in the U.S., fraud is rampant, and digital identity is flawed. The good news is that this leaves a lot of room for improvement, and therefore a lot of room for new competitors.

Fintech is here for a reason

When all is said and done, fintech is made to help individuals and businesses better manage their finances and more easily access financial services. Because money is not an optional tool for survival in the modern economy, financial services companies have a unique ability to help others through a recession or slowdown in their own industry. This pervasiveness makes for endless opportunities for banks, fintechs, and DeFi alike.

The fintech industry is not just here to serve financial services organizations, but rather to help people in this world that need financial services the most. That’s why we’re here, and it’s certainly something to be optimistic about.

Photo by Marija Zaric on Unsplash