Profile: Walmart’s fintech startup

The retailer is partnering with Ribbit Capital, and has recruited Omer Ismail from Goldman Sachs to run the venture

Nowadays it seems like everyone wants in on fintech, and retail giant Walmart is no exception.

Walmart is teaming up with fintech investment firm Ribbit Capital to create a new fintech startup that will offer “innovative and affordable” financial products, according to a news release. While this news was initially announced on January 11th, the venture became much more interesting when the Walmart + Ribbit venture nabbed the head of Goldman Sachs’ Marcus consumer unit to run the show. More on this shortly.

Walmart didn’t provide many details about what the fintech would exactly do, but it will be majority-owned by Walmart and its board will include a number of Walmart executives and Ribbit Capital Managing Partner Meyer “Micky” Malka.

Walmart CEO Doug McMillon hinted to analysts just weeks ago that customers have expressed interest in the retailer offering more affordable financial products and that he wants to find ways to “monetize” the retailer’s vast data.

Ribbit Capital

Ribbit Capital is no stranger to fintech investing, its portfolio includes Robinhood, Credit Karma and Affirm. From the third quarter of 2019 to the third quarter of 2020, Ribbit Capital was the third most active venture capital firm, according to a CB Insights report.

When the firm was founded in 2012, Malka famously said that he was taking aim at “an antiquated financial services industry that remains relatively untouched by the technology-driven evolution transforming other markets…”

And Malka didn’t waste any time pursuing this thesis. Ribbit has made big bets on Affirm, Brex, Coinbase, Credit Karma, Gusto, Jetty, Figure, Robinhood, dv01, Root, Revolut, Tomo… just to name a few.

The Walmart Partnership

Walmart has a relationship with millions of customers, Malka said in a statement, and this is built on “trust, security and integrity.”

“When we combine our deep knowledge of technology-driven financial businesses and our ability to move with speed with Walmart’s mission and reach, we can create and deliver financial offerings that are second to none,” Malka said in the statement.

The fintech company may grow through partnerships and acquisitions of fintech companies.

“For years, millions of customers have put their trust in Walmart to not only save them money when they shop with us but help them manage their financial needs. And they’ve made it clear they want more from us in the financial services arena,” John Furner, president and CEO, Walmart U.S. said in a statement. “We’re thrilled to work with Ribbit Capital in a new venture to help us deliver innovative and needed options to our customers and associates – with speed and at scale.”

This isn’t Walmart’s first foray into financial services. The retailer currently offers a credit card, a reloadable debit card, cash transfers and check cashing. Walmart continues to continue forward with this financial services.

In the mid-2000s, Walmart applied for an industrial loan charter from banking regulators, which would have the retailer to offer a suite of banking services to shoppers. But after the charter application was met with massive resistance from the traditional banking industry, Walmart withdrew the application in 2007.

However, the regulatory environment is ever-changing. In an interview with Bloomberg, Isaac Boltansky, an analyst at Compass Point Research & Trading shared, “The regulatory moat that has shielded traditional commercial banks is steadily evaporating and the competitive risks are profound.”

Goldman Sachs Alums, including Omer Ismail, Takes the Reins

Although we don’t know much about this fintech startup, we do know that Goldman Sachs partner and head of its Marcus consumer unit Omer Ismail is leaving the bank to run the Walmart fintech, the Wall Street Journal reported citing people familiar with the matter.

Ismail helped come up with the strategy at Goldman Sachs to expand into digital banking in 2014, along with a group of executives. Ismail is a legend in digital banking circles. Under his leadership, Marcus has grown to generate $1.2 billion in annual revenue – and has amassed $97 billion in deposits and $8 billion in consumer-loan balances.

David Stark will also be joining the Walmart + Ribbit venture. Stark joined Goldman in 2015 and has led the bank’s credit-card partnerships strategy – including inking partnerships with Apple and General Motors. According to Reuters, Stark was promoted in February to lead large partnerships.

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