Will Walmart be going head-to-head with traditional banks? That day is already here as the giant Bentonville merchant already has its own credit and debit/prepaid cards. In recent months it has partnered with Ribbit Capital to start a fintech, and it is also eyeing more financial services offerings through an all-purpose mobile app. Walmart’s large customer network will be its target market that gives it an instant start on any new financial services that it chooses to introduce. Traditional banks are watching closely as future Walmart news may be bigger than just about its stores and online shopping sales.
The following excerpt from a Barron’s article reports more on the topic:
Banks have to get ready for a new—and almost unimaginable—opponent. They’ve always competed with each other. Then, fintech firms such as PayPal and Square came nipping at their market share. And now the largest U.S. retailer, Walmart is lurking.
“While much has been made about the competitive threat of challenger banks/neobanks to the traditional bank business model, it’s our view that a competitive threat such as WMT is likely a more potent one,” analysts at Citigroup wrote in a note on Thursday.
In their view, Walmart wouldn’t need to have a bank charter—or even be a fully fledged bank—to enter the fray. Just by offering a few financial services and tapping into its vast store-and-customer base, it can be a “potent” threat. The company already offers two credit cards and debit/prepaid cards.
By Citigroup’s measure, Walmart’s financial services offerings could generate $3 billion a year in revenue, implying a valuation of $27 billion for its fintech business, or roughly 7% of Walmart’s enterprise value. The analysts at these figures by assuming that 20 million Walmart shoppers, or 10% or its shopper base, would derive $150 in revenue annually.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group