Walmart has introduced buy now, pay later loans through One, its majority-owned fintech startup. The move puts Walmart in competition with a similar offering from Affirm.
Last year, Walmart announced its plan to offer BNPL services for self-checkout customers through Affirm at 4,500 of its U.S. stores. Since 2019, Affirm has been the exclusive provider of installment loans for Walmart customers.
Currently, Walmart shoppers at select stores have the option to obtain BNPL loans from either provider for purchases starting at around $100, with annual interest rates ranging from 10% to 36%. These loans are applicable on various items such as electronics, jewelry, and power tools, but not groceries, alcohol, and weapons.
The move makes sense from a cost-saving standpoint, analysts say.
“The pitch that BNPL vendors make to merchants is that it attracts new customers and encourages them to spend more,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “The partnership with Affirm likely boosted sales for Walmart. But Walmart was having to pay between 2% to 8% processing costs to Affirm. Launching their own platform allows them to save significantly on processing and capture that extra spend from consumers. Affirm helped capture extra spend in the interim.”
The Growth of One
It’s been a rapid rise for One, stemming from a fintech startup that Walmart launched in January 2021 in collaboration with Ribbit Capital. [RK1] Ribbit, interestingly, was also an investor in Affirm.
At the time, Walmart said that One would “provide users with an all-in-one financial services app to holistically manage their finances in one place.” One rolled out checking accounts for Walmart employees and a handful of online customers in September 2022. Its savings accounts began offering a 5% interest rate, well above the national average, as a strategy to attract more business. The addition of BNPL to One’s offerings will further drive customers into Walmart’s financial ecosystem, presenting opportunities for cross-selling other products.
CNBC has reported that Affirm will continue to be available as a payment option at Walmart, but One is expected to receive much more promotion at the point-of-sale.
For its part, Affirm is used to coexisting alongside other BNPL lenders, so it is unlikely that the company will leave its partnership with Walmart. It has also begun exploring life beyond retail, offering BNPL loans for elective medical procedures.