By Sabrina Escobar
A Walmart-backed fintech, One, is now offering a buy now, pay later service in Walmart stores, competing directly with the retailer's partnership with Affirm Holdings.
Affirm has long been Walmart's sole BNPL provider. The service allows customers to split purchases into smaller monthly payments, whether that be online or in stores. The companies have been gradually deepening their partnership as customers grow more comfortable with using BNPL products to fund their purchases. Last December, Affirm expanded its BNPL services to the self-checkout lane in Walmart stores.
Yet Affirm will now be contending with more competition, from a business backed by the retailer itself. Walmart has started advertising BNPL services offered by One in select stores, Barron's has learned. CNBC earlier reported the news.
One is majority-owned by Walmart, and the company's top executives, including Walmart U.S. CEO John Furner, sit on its board.
Shares of Affirm fell as much as 7% following the news, but bounced back for a gain of 3% to $32.91 in early morning trading Tuesday. The stock has shed 33% this year. Walmart shares were down 1.5% at $59.26.
For BNPL providers such as Affirm, partnerships like the one it has with Walmart are crucial. The bulk of its revenue stems from merchant network fees, or what Affirm charges its retail partners to process their payments through the company's platform. The fees vary depending on the individual arrangement between each merchant and Affirm.
In the company's latest quarter, however, no one merchant exceeded 10% of Affirm's total revenue, the company said in a filing.
Walmart invested in One, a fintech start-up, in 2021 as part of a joint venture with investment firm Ribbit Capital. The banking app primarily offers checking and savings accounts. It often offers benefits tailored toward Walmart clients, including 3% cash back at Walmart on purchases made using the company's debit cards, according to One's website.
The investment is part of Walmart's continuing push into alternative streams of revenue outside of its main grocery business. These include advertising and healthcare, in addition to financial services through its investment in One.
"There's a large part of the world and certainly the U.S. that are underserved financially," said John David Rainey, Walmart's chief financial officer, at an investor conference in December. "And we see a lot of that customer demographic. And so I think it gives us the ability to participate in this space in maybe a way that others don't."
Wall Street has generally been receptive to Walmart's forays into areas outside of its core competency. These businesses often carry higher margins than the company's core retail functions. Analysts believe they could be an important source of profit growth in the future.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 23, 2024 10:37 ET (14:37 GMT)
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