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Summary
- Walmart will venture into the fintech space moving a step closer to get banking charter.
- Retail giants such as Amazon Inc have already established themselves in this emerging space.
US multinational retailer Walmart Inc (NYSE:WMT) is expected to venture into fintech, an emerging lending and payment solution space, as it announced a strategic partnership with investment firm Ribbit Capital on Monday.
The world’s biggest retailer is expected to grow in this segment inorganically, i.e., through tie-ups and acquisitions with other fintech firms. This strategic move of venturing into fintech space would help Walmart in garnering more spending from its millions of customers.
The potential venture would be a combination of Ribbit’s fintech expertise along with Walmart’s retail knowledge and scale. Notably, Ribbit Capital had previously invested in development of a stock-trading platform Robinhood. Walmart is expected to have a controlling stake in the new fintech venture.
Walmart has been closely following the competition. For instance, US multinational online retailer Amazon has been transcending retail. The competition has been promoting its own insurance products. At the same time, Asian e-commerce giant Alibaba has emerged as a major financial services provider in the region.
Also read: Fintech Drives The Banking Sector: Barclays Employs Third Tech Tool
Fintech Companies vs Traditional Financial Institutions
Customers are moving away from traditional payment systems offered by the banking and financial institutions. This has brought a sense of insecurity among the banks. Fintech companies are providing customers with additional functionalities that have made their life simpler.
Traditionally, a huge amount of service charges was collected by the banks for transactions and value added services. The fintech companies introduced dynamic payment methods such as sending money through Quick Response code which is free of cost. More importantly, these transactions can be done instantly with just a few taps on your mobile.
Few people have doubts about the transparency of the fintech companies as most of them do not hold a banking charter. But most of the fintech companies have deployed blockchain technology which guarantees transparency of transactions.
Also read: P2P Lenders Draw A Parallel Banking Industry Amid Covid-19 Crisis
Moreover, the pandemic has disrupted the banking services. This has led to further innovation within the fintech ecosystem. In 2020, during the peak of unprecedented crisis, UK-based fintech company Zopa Group was given a full-fledged banking license. Notably, Zopa Group till then operated as a peer-to-peer lending platform. Banks are poised to face stiff competition from retail giants invading their space. In the absence of any entry barrier, Walmart is now closer to get a banking charter.
