Transcription:
Chana Schoenberger: (
Good morning.
Audience 1: (
Good morning.
Chana Schoenberger: (
Hi, everybody. Hope you enjoy the donut holes with toppings toppings. This conference is not sponsored by crispy cream but we could definitely look at that for next year. This is a particularly exciting panel and by panel, I mean, fireside chat without a fire. I have with me, Julia Unger, who is the VP of financial services at Walmart. She's here to talk about Walmart's financial inclusion strategy. So I I'd be surprised if there was a single person in this room who is not a Walmart customer, everyone here, a Walmart customer. I am, they have really great rain boots that they make for farmers but they're great. They were like $19. Can't recommend them highly enough. So Julia is a new recruit to Walmart having joined after a 22 year career at Citi. So she's banker just like many of you and made the transition to retail. So let's kick this off just by saying like everyone here. Walmart has something like 200 million customers in the US. What do they want financially from you?
Julia Unger: (
Many things. As you know, more than half of America today live paycheck to paycheck, they are either subprime customers or they're just underbanked and unbanked. Most of these customer segments are not included in traditional banking system today. They want to be included and they want to be accepted. They come to Walmart for a variety of financial needs. We're an inclusion brand. We build our products, whether they're retail products or financial services products for different life stages. We serve the entire America. Our objective is to build a fully inclusive product line that meets different customer needs and that means serving underbanked, unbanked all the way up to affluent clients.
Chana Schoenberger: (
Okay. When we say unbanked and underbanked, these are people who don't have bank accounts. What do they have? What sort of products are they using now?
Julia Unger: (
Most of them are still a part of the cash inclusions. They still carry cash in their pockets.
Chana Schoenberger: (
Physical cash?
Julia Unger: (
Right. They come to Walmart to mostly bring cash to and load them on some kind of prepaid cards. They cash their checks, they still buy money orders. They send money overseas to their families. When they come to us on a weekly basis, they do very much cash like transactions. They pay their bills, they pay their Con Edison bill, their water bill. A lot of them bring their weekly paycheck to us and they cash it and they go to Walmart and they buy their essentials for their family. In fact, we know that about 90% of them go on and shop after they visit the money center. The challenge is that those transactions are not traceable. Although we know that they go on and shop, we don't know exactly what they're buying, how much they're buying it. With, what frequency. So the objective is to start including that cash in the financial system. So if we can capture the cash on some kind of a prepaid product and actually KYC these customers, so we know who they are, we can start opening debit accounts, we can help them save. We can start helping them build their credit and then graduate them over time throughout a product line.
Chana Schoenberger: (
What are some of the barriers that the customers are facing right now in terms of gaining access to the financial system?
Julia Unger: (
Well, a lot of the banks are still using traditional bureau. There's not a lot of alternative data out there. That's being leveraged for underwriting. At Walmart, whether it's through our money services or through the retail system, we have a lot of data on these customers. We know that even if they have no credit, we know when they get paid, when they paid their bills, with what frequency we know when they gave us a bad check, we know. We are using this data now to actually help us underwrite these accounts and help us create this financial ecosystem for them. The other thing that's not available is we have 4,700 stores and most of 90% of Americans live within 15 minutes of our stores. That's a really large footprint that creates a competitive advantage for us. There's not a lot of banks out there that have 4,700 branches. That allows us to kind of use our physical footprint to invite these customers into our branches and allow us to offer all sorts of financial services to them. We don't actually own any financial services today. Everything we have is leased from third parties. We have Walmart customer and we have their financial need. We work with third party, partners, probably a lot of them are sitting in this room to actually, find the right product for their needs. We are kind of creating this financial services marketplace and offer more products than any bank does today.
Chana Schoenberger: (
That's so interesting. I never think of Walmart as being a center for remittances but of course that makes perfect sense. How do you get people to switch from coming into the paycheck, cashing it out, going to buy milk and diapers to putting it in some sort of a product where they're not spending it right away, a checking account, a savings account, something.
Julia Unger: (
Yeah, I think first is education. Second is making sure that we have entry level products for them because these customers, a lot of them don't even try to apply for credit because they know that they're not gonna get approved. So we actually stopped offering credit cards at point of sale because of the approval rate being so low. Our strategy is not to give everybody credit. A lot of customers are not ready for credit but our strategy is to make sure that there's a path to credit. If we're educating these customers, if we provide options that allows them to start enter the financial world and then they allow them graduation strategy, offering credit, using alternative data and then help them move along, as their needs and life stages change, then there's a path. They know we help them put them on the path. We help them build credit, we help them save. That requires a very inclusive product line that requires the footprint that we have today that requires digital tools, which we're currently building and education through marketing. So today, as I mentioned, we use many different brands in our financial ecosystem. Every brand has a face. One of the things that we're doing is making sure that we are creating financial services branding for Walmart and that all these brands live under our umbrella with consistent voice, consistent tone, consistent messaging. It all ties together. It's not 25 different platforms. It's one ecosystem, one platform where all of our partners live together and they are passing information, passing data, they're moving the customer from one place to the next. There's just consistency in how we operate our business.
Chana Schoenberger: (
You mentioned traditional credit underwriting versus more of these alternative systems. Are you working with any of the alternatives?
Julia Unger: (
We have a lot of our own data. We have more data probably than any other data company out there. We have data, retail data. We have skew data. We know who's buying what, with what frequency, how much they're spending, how often they come back, etcetera. We also have third party data that basically the financial services companies that we work with. They know, when people deposit, when they take out cards, how much they're spending, are they using loans or revolve credit? We have all of that information. The key is just to start using it. For example, I know when somebody walks into the money center and gives me a back pay check three times and then the same customer shows up and applies for a credit card. I need to use that piece of information.
Chana Schoenberger: (
Forget about it underwriting.
Julia Unger: (
It shouldn't be a completely separate experience. That's the work that's currently underway is really creating this kind of a data warehouse that helps us underwrite customers for credit.
Chana Schoenberger: (
Interesting. It's almost like a logic puzzle. Because you know that the individual humans. They come in, you see them whenever they come in and then you have the story level data. But as you said, people who are paying with cash, there's no connection between the two sorts of matter of linking them out.
Julia Unger: (
And making sure that, that cash gets loaded to a traceable product.
Chana Schoenberger: (
So I'd never thought about this before but if you only use cash, if you don't have a card of some kind, you can't use the website, right?
Julia Unger: (
You can't use a website, you can't take an Uber, you can't sell. We don't only work directly with consumers. We are working with our customers, obviously at the shoppers that come to the store. We have 2 million associates, they have financial needs. We have small business owners, they have financial needs. So the goal is to really create an end to end financial platform that serves directly to consumer as well as B2B, B2C.
Chana Schoenberger: (
Let's talk about the education and marketing piece. Marketing, you guys do that, we all see your ads. How do you educate people on what it means to have credit, to be responsible with credit? Obviously, probably even more than people at the top end of the income spectrum, people at the bottom end of the income spectrum are very good at managing their money. It's just that they don't have very much money to manage.
Julia Unger: (
One of the things that we're doing is, we're currently in the middle of launching what we call money center of the future and those that we just launched one in Arkansas a couple of weeks ago, we're launching three more in Dallas and that's a full end to end branch. Within those money centers, we are planning to do certain workshops. We do have third party space available where our financial partners will come and educate and spend time with our customers. We also integrate other type of services, like tax preparation and things of that nature. We are using digital boards to making sure that we're telling the right story to the customer at the right time. We have created these self-service tablets that focus on acquiring new customers but also educating the new customers. The technology will enable a lot of interaction with our products, as well as using some of the videos and additional marketing within digital space to make sure that we're engaging them, explaining the products and then there's an opportunity to apply to those products.
Chana Schoenberger: (
Any efforts to do this outside of the money center itself in the rest of the store?
Julia Unger: (
The idea is that anything that's available on a tablet at the money center will be available online as well as our mobile. Not all of Walmart customers have mobile devices or the ones that do, don't necessarily have the type of mobile device that allows to download a big Walmart app or the storage concerns and things of that nature. So we wanna make sure that we are everywhere. Expanding channels. It's basically we're available in the physical store. We have tablets there for people that can't use their mobile devices. We do want people to go on their mobile devices as well and we want them to use walmart.com. Ultimately we're trying to build a Walmart wallet where everything lives, where one of the things that we're doing right now is creating a digital ID for our customers. So when you show up to Walmart, we know who you are and whether you are using a money center or fulfilling your subscription or buying new tires, you don't need to identify yourself 50 times. You have this kind of a Walmart pass and we know who you are because we already validated your ID. Therefore you can interact with us more freely throughout the entire Walmart enterprise.
Chana Schoenberger: (
Is that some sort of a card or a dongle?
Julia Unger: (
No. It's just a digital ID that lives in your digital wallet on your phone.
Chana Schoenberger: (
Okay. Are people getting some sort of rewards for this?
Julia Unger: (
Well, the reward is that it's easier to shop at Walmart and interact with us. The experience today is that because these are standalone platforms, every time you show up, you have to show your ID, you have to be validated. There's a process that goes along with that. It's very time consuming both for the customer as well as our associates. So we're just trying to simplify the experience.
Chana Schoenberger: (
Yeah. That makes perfect sense. Other areas of financial services that you're looking into. Some things that, I wanted to ask about, you mentioned small businesses as one of them.
Julia Unger: (
Yeah, there's definitely opportunity to go into new segments. So obviously there are a lot of small business customers today, that shop at Walmart, we treat them as consumers today. But their opportunity to go into small business space, nonprofit space. We have credit cards today that offer certain value propositions to those groups but there's an opportunity to create a full product line for these clients that are specific to their needs. Like if you think about nonprofit credit cards today, we have created a product that fills that need. But I would say that that's probably not the best product that's, I'm super proud of today. It just needs to fit the overall Walmart strategy. Let's just say there's a back to school promotion and we have a nonprofit credit card that could work for schools. How do you connect the back to school and teacher supply lists that are being created and then, opportunity to buy that at Walmart, with your nonprofit card. It needs to come together and make sense. I think one of the things that's important and you and I talked a little bit about how do you make financial services relevant in retail? One of the things that's super important is to make sure that financial services is impacting broader flywheel at Walmart. It's not just about building financial services business but it's making sure that it's relevant to the retail. So retail is very focused on seasons, for example. How do you enable use this product line to enable sales at a certain time with a certain products and making sure that it's relevant to the merchants, to the buyers, as well as to the customers.
Chana Schoenberger: (
Back to school holidays.
Julia Unger: (
Yeah. It's all about seasons. You go from season to season.
Chana Schoenberger: (
That's interesting because you never think of financial services that way.
Julia Unger: (
Exactly. But, that's one of the things that we try to do is to take what we have and just package it in the way that it's relevant to their organization. So a lot of times I remember first arriving at Walmart and thinking about the buy now pay later product and thinking how it was missing from electronics section and having those conversations with the merchants in terms of placement and merchant doesn't care about buy now pay later loan but they too care about spend and they wanna sell more TVs. So how do you position the product to explain that people that actually take buy now pay later loans, come back with high frequency, they fill up their baskets, they buy more. Once you translate that into impact that you have on GMV, then it's a much easier conversation for everybody involved.
Chana Schoenberger: (
That's interesting the idea of financial services having to convince these internal clients as well as of course the customer.
Julia Unger: (
Well, they're selling product, so if they have any advertising space, the merchants, they wanna advertise Samsung TV or whatever else they're selling. What's important is to make sure that we are taking our product line and making it relevant and really making it clear that these products enable the sale.
Chana Schoenberger: (
Another thing that we had talked about earlier was the idea of the drivers and the associates who work for Walmart financial services for them. How does that work?
Julia Unger: (
Yeah. We have, for example, spark drivers is another financial opportunity where it's a new segment. It's basically last mile drivers that deliver last mile product to our customers. I view them as a customer segment as well. They drive their cars, they have an app that they use so they can book which deliveries they gonna be making. They need to get paid, that money needs to go somewhere. There needs to be a product there to capture their income. Their car can break down tomorrow and they might need a car loan to fix their vehicle. So I wanna make sure they're coming to us for those loans. Then as they continue driving, there's an opportunity to repay that loan. We know how much they're making because we know how often they drive, we know how much they're making. If you connect their income, their deposit product and their lending product and it all sits in one ecosystem, which is basically their app that they're using to book the jobs. It's just a simple interaction model between us and that customer segment. But it applies to anybody. It's associates, it's the sellers on the marketplace. It's small businesses. There are different customer groups that we've been thinking about in terms of who do we wanna offer our solutions to?
Chana Schoenberger: (
It's interesting because this is what the banks have always done. They've always tried to get the whole employee base to be customers of the bank. There's all this messaging like, you bank here, you work here, so you trust us, we trust you. We know you don't wanna keep your money in house. Then often there are discounts and things like that but of course as more retail, especially big retail moves into financial services, there's gonna be more of these conversations.
Julia Unger: (
Yeah. I've never worked for a company that has 2 million employees and that doesn't include the drivers or any other segments that we talked about. So there's a huge opportunity. As we think about these customer groups and as long as we have the product line and we make it easy for them to interact with us. We also committed to offering the lowest rates. A lot of these customers that we work with today, I say it's expensive to be poor.
Chana Schoenberger: (
Yeah.
Julia Unger: (
They end up paying the highest interest rates, the highest fees. At Walmart, just in our retail, we are committed to everyday low price. We try to do that with financial product as well. For example, we just deployed Walmart to Walmart money, transferred to Mexico, and we do that at $2 and 50 cents. That's half the price of anyone else on the market today. So we try to really make sure that we are offering the product at the best cost.
Chana Schoenberger: (
So the person on the other end just goes to a Walmart in Mexico.
Julia Unger: (
Yep.
Chana Schoenberger: (
Picks it up at the desk.
Julia Unger: (
Yeah. And the plan is to expand that globally.
Chana Schoenberger: (
Oh, wow. Yikes. Remittances are particularly interesting, especially given what we were talking about this morning with the payments and how they're affected by sanctions. So what's in it for Walmart. What does Walmart get out of this?
Julia Unger: (
Well, a few things, it enables a flywheel. So people that have financial services products can shop more. We are also seeing a lot of data that, they're more loyal to us. They come back to us with high frequency. They trust us more. There's a lot of brand loyalty when it comes to Walmart. It allows us to impact the broader flywheel. For example, we're seeing, incredible correlation between financial services and our Walmart plus members. And so, as we're trying to grow Walmart plus members, offering that membership to financial services allows us to bring those two value propositions closer together. At Walmart we have certain priorities, those priorities sit on that flywheel and we wanna make sure that whatever we're doing in financial services impacts the rest of those strategic areas.
Chana Schoenberger: (
So getting people to spend more, more often on bigger things.
Julia Unger: (
Becoming members, focusing more on digital platforms. Buying more inventory, things like that.
Chana Schoenberger: (
Okay. So what is next for financial inclusion for you guys?
Julia Unger: (
A few different things. One is making sure that all of our solutions sit on one platform so they can start communicating to each other and we can really leverage the data to make fraud decisions, underwriting decisions and really kind of creating one cohesive platform for the customer. So it doesn't feel like it's 25 different things. Two is creating a face for financial services at Walmart. We just launched our new brand, which is spark money. If you visit our new store, you will find that brand consistent. That's just one store. We have 4,700 more to go. We wanna make sure that as people think about spark money, there's consistency in our tone and what we stand for and the language that's being used and what is our commitment to the customer. Three is an inclusive product line. We offer a lot of products today but we do lack some entry level products that could be helpful. Things like secure card, things like personal lending, things like quick cash, those are the value propositions that we're currently looking at to allow easier graduation strategy for our customer. Lastly digital, which is very important. A lot of the things that we do today is done in physical locations, which is great because we have a lot of presence there but the challenge is that a lot of our solutions are not digital. So we wanna make sure that we are creating opportunities for people to interact online. If you come to chase, there's a chase.com and you can view those products, you can apply those products, you can manage your existing products. Ideally that's the environment that we should have as well. We wanna make sure that people are using the Walmart wallet and that our financial solutions are sitting in that product, whether it's store value, gift cards, buy now pay later loans, our credit cards, all of that should reside in this one place for the customer. Those are like a mobile app, obviously, same kind of a facelift as walmart.com. We wanna make sure that a lot of these solutions can be used by a customer in the self-service type of way. For example, on the first of each month, there are lines and lines and lines of people just trying to cash their check. Taking a picture of your check and depositing, it is a business as usual today for most banks. So those are the types of tools that we wanna make sure that if you're paying your bill, if you're depositing check, if you're doing these kind of simple transactions, you can come to our branch but you should be able to do those things online as well.
Chana Schoenberger: (
So there's a big regulatory focus now for banks on what the CFPB is calling junk fees, which is a bigger question of how to reconcile financial inclusion, it costs money to provide services to customers and it's not cheap often. As you mentioned, the Walmart brand is everyday low prices. How do you make money and still include all the people who are not being served by the financial services industry right now?
Julia Unger: (
We don't look at it product by product because of the number of products that we have. It's all about multi relationship. So we wanna make sure because of the number of products that we offer we don't always make money on every single product. Sometimes we don't make money on milk either but we make money on eggs that are being sold next to the milk. So it's the same strategy. We offer every dollar low prices and we wanna make sure that the customer really uses a full solution and that it's not a one time transaction but we look at the customer on the customer basis and on the customer basis, it makes sense because they're doing a number of different transactions with us, they're multi relationship client and maybe there are solutions within that ecosystem that are not extremely profitable but we make up for it in other ways. We don't only look at whether or not financial solution makes money. We also look at, does that make an impact on the sales in store? There are two ways of us making contribution to Walmart. One is, does a credit card P and L look good and that's my Citi Bank old head.
Chana Schoenberger: (
Right.
Julia Unger: (
Then the second more important one is, are we making more sales because this customer has the credit card in their pocket. Both of that very important. So we wanna make sure that the impact to the broader Walmart is there.
Chana Schoenberger: (
It's interesting because I wonder if that that's one model that could solve the problem of the underbanked, which banks have sort of not been able to solve. There have been a ton of efforts by banks to move further and further down. Yet there are millions of people of this country who don't have a bank account and who are using these sort of shadowy on the margin sort of financial solutions. So retail might be one way to get that solved.
Julia Unger: (
I'm hoping that spark money can solve that beef.
Chana Schoenberger: (
Well, thank you very much. This has been super interesting and I appreciate you coming on with me.
Julia Unger: (
Thanks for having me.