Diversification. Traditionalists will tell you that’s the name of the game.
Late last summer, Walmart (WMT) made its biggest splash outside the world of retail when it partnered with Oracle (ORCL) to bring the Chinese dance app TikTok to the U.S. The agreement, which gives Walmart a 7.5% stake in the newly formed TikTok Global business, enables it to track consumer data on the social media platform which has over 500 million users worldwide, including more than 100 million in the U.S.
Currently, the deal still currently remains in sort of a lame-duck period since the September announcement, but that hasn’t stopped Walmart from pursuing innovative opportunities with the Tik Tok platform to sell stuff via live stream.
This week, with its sight set on the next big venture, the retail giant announces it’s entering the fintech space. Yesterday, Walmart said it will soon be creating a fintech start-up with Ribbit Capital, one of the venture capital firms behind Robinhood.
For a store with more than 4,700 physical locations across the country, Walmart interacts with millions of customers each year – including some who don’t have a relationship with a bank or a financial advisor, so the opportunity to get new fintech services in front of prospective users is there.
As CNBC argues, Walmart could be tapping into a bit of a neglected market. According to the Federal Reserve, 6% of adults don’t have a checking, savings or money market account, and about 16% are “underbanked,” meaning they have a bank account but also use alternative financial service products, like a money order.
The argument is those Americans are more likely to turn to short-term solutions, such as pawnshops or payday loans, which can lead to additional charges or higher interest fees. Any way Walmart can offer a convenient alternative, it stands to reason customers might be receptive.