From superstore to super app: Walmart's next steps in finance

To date, Walmart's approach to financial services has been like its approach to running a superstore: Whatever you need, it's in there somewhere. 

This can still be daunting, however, so the retail giant is working to make its financial offerings a bit more cohesive — and a lot more digital.

"We want to centralize all financial solutions on one platform so it doesn't feel like it's 25 different things," Julia Unger, vice president of financial services at Walmart, said during American Banker's Payments Forum this week. "People who have financial services can then shop for more." 

And not just more financial products. Unlike banks, Walmart can cross-sell just about anything. The company estimates that about 90% of people who visit Walmart to load prepaid cards, cash checks and buy money orders then go on to shop for other products throughout the store.

Walmart's designs on financial services and its retail scale have long worried bankers, though it  has never become a full-blown bank. Its latest moves bring it closer than ever, accelerating a strategy to build a financial super app, or full menu of financial and nonfinancial products that can be easily accessed through a single account. Competitive pressure on banks is building as large retailers such as Amazon and Walmart, and fintechs like Block and PayPal, add financial services to their payment apps. 

Walmart can not only bring banking and payments in-aisle ahead of traditional banks, but marry it with data feeds to enhance the shopping experience before the customer ever puts an item into a shopping cart, Richard Crone, a payments consultant, said in a phone interview.

"The next wave in payments is in-aisle where embedded offers, financing options and payments are integrated into the retail shopping experience before checkout," Crone said. "The Walmart app and Walmart Pay are critical elements to fulfilling the embedded bundled potential for increasing in-store sales."

To bridge financial services to Walmart's more traditional business, the chain is taking steps such as streamlining access to a digital wallet, encouraging its users to build credit and enhancing its shopping and payment technology.  "We are creating financial branding for Walmart, with one ecosystem and one platform where all of these products can live together," Unger said. 

The retail chain wants to improve how it analyzes data for people that use the store's financial services and shop for other products. That data could help boost usage of Walmart's debit cards, as well as enhance messaging aimed at building debit card balances. "That could help graduate these consumers to credit or other product lines," Unger said. 

Walmart is creating a digital ID for its consumers, enabling the company to better handle authentication for its digital wallet and track what consumers are buying. This digital ID can be used not only for Walmart's consumer and business customers, but also its 2.3 million employees, many of which also use the retailer's money services. 

Walmart could, for example, tailor buy now/pay later lending to specific departments or products as a way to guide not only the shopping experience but also financial inclusion. Walmart's ability to accrue consumer purchase and payment data enables it to perform alternative underwriting for loans. "The strategy isn't to give everyone credit but give them a path to credit," Unger said. 

Walmart has about 4,700 stores in the U.S., and 90% of Americans live within 15 minutes of a Walmart location. That allows the chain to compete with banks for walk-in financial services, Unger said, contending Walmart can offer "more products" than banks.

"There are not a lot of banks that have  4,700 branches," Unger said. 

JPMorgan Chase and Wells Fargo have about 4,900 branches each, according to Statista. Bank of America has the next-largest branch network with about 4,100. All others are below 3,000.

Walmart's hubs in Arkansas and Texas develop technology  such as checkout-free payment systems to counter the influence of Amazon Go. Separately, venture capital investor Ribbit Capital and Walmart created a fintech project called Hazel, which then acquired a challenger bank called One, taking the acquired firm's name. One could potentially bring a menu of financial products to Walmart, enabling the retailer to counter super apps from PayPal, Meta or Apple's partnership with Goldman Sachs.

Product bundles are the way payment providers can differentiate themselves in the face of disruption and consolidation, Crone said. 

"This is why PayPal bought Honey, Square bought AfterPay, and why banks use Cardlytics to embed offers into digital banking," Crone said. "But none of these e-commerce options possess the dominant physical in-store presence of a Walmart store. There is a huge competitive advantage to be gained from digitizing the store."