Walmart’s fintech arm One enters BNPL arena, challenges Affirm

In a strategic move poised to reshape the landscape of retail finance, Walmart’s majorly-owned fintech startup, One, has commenced offering buy now, pay later (BNPL) loans for high-value purchases across over 4,600 of its U.S. stores, according to exclusive reports obtained by CNBC. This bold step throws One into direct competition with Affirm, the reigning leader in BNPL services and the exclusive provider of installment loans for Walmart patrons since 2019. The Bentonville-based retail giant had recently expanded its partnership with Affirm, introducing it as a payment option at self-checkout kiosks. The expansion of One’s role within Walmart hints at a looming showdown in both physical and online retail domains in the United States. This development could potentially disrupt existing partnerships involving a myriad of players, ranging from fintech entities to traditional card companies and established banks.

One’s foray into lending represents a significant stride towards its overarching ambition to emerge as a comprehensive financial super app, offering a seamless platform for saving, spending, and borrowing capital. Since its inception in 2021, One has been spearheaded by CEO Omer Ismail, a former executive at Goldman Sachs, attracting attention and posing challenges to the conventional banking sector. Operating predominantly under the radar from its headquarters in a Manhattan WeWork space, One has been stealthily crafting its product portfolio, including the launch of a debit account in 2022. Now, with its BNPL offerings, One is set to directly compete with established partners like Affirm, which contributed to Walmart’s staggering $648 billion in revenue last year.

During a recent visit to a Walmart outlet in New Jersey, CNBC observed advertisements from both One and Affirm clamoring for attention alongside consumer electronics. The checkout counters featured options from both providers, offering loans ranging from $100 to several thousand dollars at annual interest rates between 10% to 36%. The availability of BNPL services for a diverse range of products, from electronics to automotive accessories, signifies the growing acceptance and popularity of this payment model among consumers. According to Adobe Analytics, BNPL transactions drove a substantial $19.2 billion in online spending from January through March of this year, reflecting a notable 12% year-over-year surge.

While Walmart and One declined to comment on these developments, industry experts speculate that One’s expanding role within the retail giant could potentially squeeze out existing partners like Affirm and Capital One from coveted partnerships. The strategic positioning of One within Walmart’s ecosystem aligns with the retailer’s broader aspirations to diversify revenue streams beyond its traditional retail operations. With recent acquisitions such as TV maker Vizio for $2.3 billion aimed at bolstering its advertising business, Walmart is aggressively venturing into finance and healthcare sectors, mirroring its rival Amazon’s playbook.

In the realm of financial services, One represents Walmart’s latest endeavor to penetrate the banking sector. Unlike previous attempts thwarted by regulatory hurdles, Walmart has adopted a collaborative approach this time, forming a joint venture with investment firm Ribbit Capital and assembling a team of industry experts from various financial backgrounds. Despite lacking a banking license, One has partnered with Coastal Community Bank to offer debit cards and installment loans. Leveraging Walmart’s extensive footprint and massive customer base, One aims to carve a significant niche in the financial services landscape, potentially generating substantial revenue in the near future.

As One gears up to expand its lending portfolio beyond installment loans, recent legal victories against partners like Capital One hint at Walmart’s intentions to consolidate financial operations under its fintech arm. With plans to introduce new credit card options and capitalize on its massive customer base, Walmart’s foray into finance through One poses a formidable challenge to established players in the industry. While One’s aggressive expansion may overshadow existing financial partners, its close affiliation with Walmart provides a distinct advantage in capturing a sizable market share. By offering attractive incentives and leveraging its extensive network, One aims to cement its position as a leading player in the fintech landscape, reshaping the dynamics of retail finance in the process.