Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Amazon, Walmart, the Secret Battle for FinTech Supremacy: Part II
Highradius | Anuj Saxena | Flashback to June 2018
Digital to Physical, Physical to Digital and Customer Segments
As Walmart rushes to become Amazon before Amazon can become Walmart, the impressive way Walmart has addressed the problem reminds me of a quote from Jim Collins in his bestseller “Good to Great”:
“The good-to-great companies displayed two distinctive forms of disciplined thought. The first, and the topic of this chapter, is that they infused the entire process with the brutal facts of reality. The second, which we will discuss in the next chapter, is that they developed a simple, yet deeply insightful, frame of reference for all decisions.”
While just my conjecture as an outsider looking in, it feels to me that Walmart has done both:
- It has accepted the brutal fact that it is never going to beat Amazon in the online space in the U.S., but that e-commerce’s continued growth is absolutely inevitable and it needs to be a player (hence its $16-billion bet on Indian e-commerce), and
- Management’s frame of reference for digital decisions seems to come from looking to provide solutions that combine its areas of entrenched advantage, namely its low-affluence customer base and unmatched network of stores (it has one within 10 miles of 90% of American consumers). Examples of this are its curbside collection service for online customers and upcoming drive-up grocery pickup kiosks.
These two forms of “disciplined thought” have also driven Walmart’s FinTech strategy…
See: What bankers need to know about the mobile generation
The FinTech Power Plays
Before outlining Walmart’s FinTech Power Plays, I want to let you in on a not-so-well-known “secret”: Walmart’s dabbles into the world of finance are not new. In fact, its record stretches back to 1999, when it attempted to purchase a small Oklahoma thrift, citing a desire to offer savings and checking accounts to its customers. That plan was ultimately thwarted by banking legislation which prohibited non-financial companies from owning banks regulated by the Fed. Three years later, though, it was back at it again, and yet again, it was stopped by powers in finance. Per the Institute for Local Self-Reliance’s reporting at the time:
“A coalition of consumer groups, unions, independent banks, credit unions, and realtors managed a legislative feat in California last month when they pushed through an 11th hour bill to block Walmart’s attempt to acquire a small bank.
Opponents of the move argued that it could lead to dangerous conflicts of interest. Not only might Walmart use its size and power to muscle out smaller banks and credit unions, it could also deny loans to retail competitors and their suppliers. Such distortions would undermine the soundness of the banking sector and lead to ‘a dangerous aggregation of economic power’.”
Walmart protested the “unfair targeting” based on its size, and since then has made few sustained attempts at similar approaches to enter banking. While the company is no longer going after banks (directly), it still realizes that by enmeshing itself into the lives of its low-affluence consumers via providing vital financial services, it can widen and deepen the moat they have around them. This has driven the formulation of FinTech plays which are working phenomenally for Walmart (so far)
See: Banks have lost a quarter of the payments franchise to new players
1. The Payments Play: Walmart Pay
In 2015, Walmart took a decisive step into the FinTech sphere – making headlines for eschewing external payment solutions like Apple Pay and Samsung Pay – for its own in-house solution, which was launched in 600 stores. Walmart Pay’s app enables shoppers to transact at the register via QR code. As they approach the register, a QR code pops up on the POS screen and customers scan it to activate the service. Once the code has been read, items can be scanned as normal and when checkout is complete, the payment card associated with the Walmart Pay account is charged and a receipt issued within the app.
How has it fared since launch? Well, in November last year, a Bloomberg piece updated that Walmart is “close to surpassing Apple Pay in usage for mobile payments in the U.S.” With 4,774 stores offering it and tens of thousands of new users signing up each day, its domination of the U.S. seems to be a fait accompli.
The US market for mobile payments is worth $550 billion but is set to skyrocket to $3 trillion in just two years, and Walmart is jockeying for position as the biggest player. I can’t help but think that with the widespread use of QR code technology in their business, a move to Bitcoin (or another cryptocurrency) could be the next step for Walmart. After all, it represents a much faster and secure mobile payment option…
2. The Prepaid Card Play: Walmart MoneyCard
In 2015, Walmart signed a partnership with FDIC insured bank GreenDot – a branchless digital Challenger Bank from Southern California that issues plastic prepaid cards. GreenDot does not offer credit, so only basic ID checks are required for customers to be able to receive and pay money with ease (essentially creating a checking account). This deal yielded the re-loadable, prepaid Walmart MoneyCard, which opened the floodgates for many of Walmart’s un/underbanked consumers. With the MoneyCard, holders can:
- Use it for purchases everywhere MasterCard or Visa debit cards are accepted in the U.S.
- Deposit checks via their smartphone’s camera
- Receive their wages by direct deposit from their employers
- Write checks to pay rent and other bills requiring a paper check
- Order personalized checks using the Walmart MoneyCard Mobile App
- Pay bills for free with the online bill pay service
- Send money for free to another participating card issued by Green Dot Bank (including the Walmart MoneyCard, of course)
- There are no overdraft fees, at all and,
- Cards are registered and protected against unauthorized transactions
All of which can be tracked around the clock in the Walmart MoneyCard App.
See: Growth in Canadian FinTechs Having Impact on Canada’s Banking Landscape
3. The Money Transfer Play(s): Walmart2Walmart
In April 2014 Walmart launched its groundbreaking, in-store money transfer service for customers – a joint venture with Ria Financial – making money transfer simpler and cheaper for customers. This was launched in 4000 stores, promising to make the process of money transfer cheaper and more transparent for its consumer-base, and boy has it! Since then, customers have saved approximately $700 million on fees, enabling them to keep more of their hard-earned cash in their pockets for important things (like buying groceries… at Walmart).
Customers can walk into any of the designated “money center” stores’ service desks (or start the process with the Walmart App and finalize in-store), complete a form with the transfer details (amount, recipient name, and state) and then can use cash or debit cards for payment. W2W then transfers the money to the intended recipient who can pick the cash up at any store in the specified state in a matter of minutes. No bank accounts needed at all and the service costs just $4 to send up to $50, $8 to spend between $51 and $1,000, and $16 to spend between $1,001 and $2,500.
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