Retail giant Walmart (NYSE:WMT) has announced that it’s creating a fintech start-up with Ribbit Capital, one of the venture capital firms behind popular trading platform Robinhood.
Walmart has not announced the name of the new company or when its services will be available. It said it will develop unique and affordable financial products for Walmart employees and customers. Shares of Walmart rose 1.5% on the news in after-hours trading Monday. Walmart’s market capitalization is currently $416.7 billion.
The fintech start-up will be majority-owned by Walmart and its board will include several company executives, including Chief Financial Officer Brett Biggs and Walmart U.S. Chief Executive Officer John Furner. Walmart said it will also name independent industry experts to the board and may acquire or partner with other fintech companies.
With more than 5,000 stores globally, Walmart interacts with millions of customers each year – including some who don’t have a relationship with a bank or a financial advisor.
For example, 6% of adults in the United States don’t have a checking, savings or money market account, according to the U.S. Federal Reserve. About 16% are "underbanked," meaning that they have a bank account but also use alternative financial service products such as a money order. Those Americans are more likely to turn to short-term solutions, such as a pawn shop or a payday loan, which can lead to additional charges or high interest charges.
Walmart already offers some financial services for customers. For example, it has Walmart MoneyCard, a prepaid debit card that customers can load with money and use for purchases.
Walmart’s co-owner of the new company, Ribbit Capital, has a history of investing in fintech companies. Its portfolio includes Robinhood, a fee-free investing start-up; and Credit Karma, a company that offers consumer-friendly tools such as free credit score checks.
