Wal-Mart Stores To Exacerbate Synchrony Financial Woes With Affirm Deal

Wal-Mart Stores Inc. (NYSE:WMT) plans to offer installment loans to customers with limited credit histories as it seeks to boost sales of pricey items in its stores. The nation’s largest retailer has opened talks with financing startup, Affirm, as it looks to use the firm’s services to offer soft loans.

Affirm-Walmart Installment Loans

Affirm and Walmart have been in discussion about the possibility of teaming up since last year. Talks appear to have picked pace this year as the retailer continues to explore ways of giving customers access to a wide range of financing options to boost sales and shrug off competition posed by e-commerce platforms.

Reports indicate that Walmart and Affirm are close to a deal that will see the San Francisco firm run by PayPal co-founder, Max Levchin, offering installment loans as early as this fall. The installment loans will at first target customers at select locations. The pair will expand the program to more locations should it prove to be successful enough.

The installment loans up for grabs will mostly be geared towards costlier items on offer at Walmart such as tires. The loans are designed to target customers who do not wish to make large sum payments but instead spread payments over time. The loans will also come with a fixed annual percentage rates of between 10 -30 %.
Affirm fits the bill as Walmart partner given that it has over the years offered loans of up to $10,000 for people who don’t have enough borrowing history.

Synchrony Dilemma

A partnership with Affirm would also underscore the retailer's desire to expand its customer base by mainly focusing on customers with limited credit histories. However, the move would also spell trouble for Synchrony Financial (NYSE:SYF) which is the retailer’s exclusive U.S card issuer.

The fact that Affirm offers loans could significantly reduce the number of people who apply for Synchrony credit cards. Walmart being Synchrony largest retail credit partner could leave the credit card provider at a precarious position as people turn their attention to installment loans at the expense of credit cards.