Amazon, Walmart, the Secret Battle for FinTech Supremacy: Part II

25 June, 2018
11 min read
Brett Johnson, AVP, Global Enablement
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What you'll learn

  • Learn about customers through precise demographics.
  • Learn about Walmart’s driving notions on “disciplined thought” in FinTech.
  • Design logical Power Plays to maximize your economy.
Titan Talk: The Walmart Empire
Know Thy Customer
Digital to Physical, Physical to Digital and Customer Segments
The FinTech Power Plays
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In the autobiography, “Sam Walton: Made in America”, Walmart’s fabled founder writes:

 “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Little did he know that after building one of the most imposing businesses (and fortunes) in history, just decades later his “boss” would be contemplating the possibility of mass redundancies due to a plucky, Seattle-based tech company named after a river.

In part one of this two-part series, I drew comparisons between the Walmart/Amazon battle for retail supremacy, and the Greek tale of the Titanomachy. As a refresher, the Titanomachy was a decades-long war between the powerful, older deities – the Titans – and their offspring challengers, the Olympians, in a battle for control of the universe. A worthy prize, indeed. I also pointed out that while this battle for the retail universe continues to rage on, below the surface, both companies are making moves in the FinTech arena, which are both impressive and potentially landscape-shifting:

“…there’s a layer to this battle which has gone under the radar. For years, behind the scenes, both companies have been quietly building up arsenals of FinTech firepower…. Why does this matter? Well, as we’ve discussed banks are under fire from thousands of start-ups picking off parts of their business models. While a non-trivial concern, the reality is that start-ups do not have the resources or scale necessary to present a truly existential threat to banks. Walmart and Amazon, however, do…”

In this piece, we’ll uncover the FinTech secrets of this titan.

Titan Talk: The Walmart Empire

For all the headlines about Amazon’s imposing scale, Walmart’s size in the realm of the tactile is enough to give Amazon an inferiority complex. At the time of writing:

  1. Walmart has a headcount of 2.3 million (they have more employees than 89 countries have citizens)
  2. Operates 11,700 retail units across 28 countries, and
  3. Grosses half a trillion dollars in revenue (3x Amazon’s top line)

Walmart’s heft was built on Sam Walton’s key insights into the retail sector, namely: if he focused on offering the lowest prices possible, he could make up for it with scale and volume (which would permit economies of scale over time), giving him carte blanche to model the supply sector and retail landscape after his own designs.

That thought process fueled a business model which has enabled Walmart to offer very low prices since the opening of his first five-and-dime store in 1950:

  1. Walmart’s sales volume is colossal due to the spread of the operation and vast customer base
  2. Decades-honed supply chain management expertise which drives efficiencies and reduces outlays
  3. Low overhead and operational expense
  4. Leveraging of ever-increasing size to squeeze suppliers on price

This business model remained sovereign, until the advent of the internet and e-commerce, which has stripped storefront overhead costs out of the equation and enabled the likes of Amazon to start chipping away at the supply-side economy of scale advantages.

Know Thy Customer

Walmart remains the only retailer with the size and financial clout to actively fight back against Amazon’s retail rout. The company’s counter-punches have been aggressive and frequent. They’ve had to be because in recent years Amazon has waded into Walmart waters to target less-affluent households.
Roughly 60% of the middle to high-end market have Prime memberships in the U.S. For Amazon to maintain the inexorable growth of Prime, a move down the income curve provides the only viable avenue. So far, it has done so by making cash payments possible and proffering a discounted Prime for government assistance recipients.
According to recent data from Kantar Retail’s ShopperScape, the average Walmart shopper is a 51-year-old female with an annual household income of $56,482.

Income Graph of Income vs All shoppers

By comparison, Amazon’s average customer is just 37 years old and the average annual household income of Prime members is a hefty $90,000. Because the “Everyday Low Prices” philosophy was baked into the very DNA of the company, encroachment by Amazon into this territory poses a vast, existential risk to Walmart.
Walmart’s aforementioned counter-punches to ensure prices remain lower than Amazon’s are working: LendEdu’s data has found that:

“the total cart balance of our 50 identical items would be 10.37 percent more expensive if purchased from Amazon as compared to Walmart. Furthermore, Amazon was found to be more expensive in four of the five categories examined, with the widest margin occurring in the “Home Goods” segment.”

Digital to Physical, Physical to Digital and Customer Segments

As Walmart rushes to become Amazon before Amazon can become Walmart, the impressive way Walmart has addressed the problem reminds me of a quote from Jim Collins in his bestseller “Good to Great”:

“The good-to-great companies displayed two distinctive forms of disciplined thought. The first, and the topic of this chapter, is that they infused the entire process with the brutal facts of reality. The second, which we will discuss in the next chapter, is that they developed a simple, yet deeply insightful, frame of reference for all decisions.”

While just my conjecture as an outsider looking in, it feels to me that Walmart has done both:

  1. It has accepted the brutal fact that it is never going to beat Amazon in the online space in the U.S., but that e-commerce’s continued growth is absolutely inevitable and it needs to be a player (hence its $16-billion bet on Indian e-commerce), and
  2. Management’s frame of reference for digital decisions seems to come from looking to provide solutions that combine its areas of entrenched advantage, namely its low-affluence customer base and unmatched network of stores (it has one within 10 miles of 90% of American consumers). Examples of this are its curbside collection service for online customers and upcoming drive-up grocery pickup kiosks.

These two forms of “disciplined thought” have also driven Walmart’s FinTech strategy…

The FinTech Power Plays

Before outlining Walmart’s FinTech Power Plays, I want to let you in on a not-so-well-known “secret”: Walmart’s dabbles into the world of finance are not new. In fact, its record stretches back to 1999, when it attempted to purchase a small Oklahoma thrift, citing a desire to offer savings and checking accounts to its customers. That plan was ultimately thwarted by banking legislation which prohibited non-financial companies from owning banks regulated by the Fed. Three years later, though, it was back at it again, and yet again, it was stopped by powers in finance. Per the Institute for Local Self-Reliance’s reporting at the time:
“A coalition of consumer groups, unions, independent banks, credit unions, and realtors managed a legislative feat in California last month when they pushed through an 11th hour bill to block Walmart’s attempt to acquire a small bank.
Walmart filed an application with state regulators in April to buy Franklin Bank of California, an industrial bank with $2.5 million in assets and three employees in Orange County. The new law prohibits non-financial firms from buying state-chartered banks.
Opponents of the move argued that it could lead to dangerous conflicts of interest. Not only might Walmart use its size and power to muscle out smaller banks and credit unions, it could also deny loans to retail competitors and their suppliers. Such distortions would undermine the soundness of the banking sector and lead to ‘a dangerous aggregation of economic power’.”
Walmart protested the “unfair targeting” based on its size, and since then has made few sustained attempts at similar approaches to enter banking. While the company is no longer going after banks (directly), it still realizes that by enmeshing itself into the lives of its low-affluence consumers via providing vital financial services, it can widen and deepen the moat they have around them. This has driven the formulation of FinTech plays which are working phenomenally for Walmart (so far)

1.  The Payments Play: Walmart Pay

In 2015, Walmart took a decisive step into the FinTech sphere - making headlines for eschewing external payment solutions like Apple Pay and Samsung Pay - for its own in-house solution, which was launched in 600 stores. Walmart Pay’s app enables shoppers to transact at the register via QR code. As they approach the register, a QR code pops up on the POS screen and customers scan it to activate the service. Once the code has been read, items can be scanned as normal and when checkout is complete, the payment card associated with the Walmart Pay account is charged and a receipt issued within the app. How has it fared since launch? Well, in November last year, a Bloomberg piece updated that Walmart is “close to surpassing Apple Pay in usage for mobile payments in the U.S.” With 4,774 stores offering it and tens of thousands of new users signing up each day, its domination of the U.S. seems to be a fait accompli. The US market for mobile payments is worth $550 billion but is set to skyrocket to $3 trillion in just two years, and Walmart is jockeying for position as the biggest player. I can’t help but think that with the widespread use of QR code technology in their business, a move to Bitcoin (or another cryptocurrency) could be the next step for Walmart. After all, it represents a much faster and secure mobile payment option…

2.  The Prepaid Card Play:Walmart MoneyCard

In 2015, Walmart signed a partnership with FDIC insured bank GreenDot – a branchless digital Challenger Bank from Southern California that issues plastic prepaid cards. GreenDot does not offer credit, so only basic ID checks are required for customers to be able to receive and pay money with ease (essentially creating a checking account). This deal yielded the re-loadable, prepaid Walmart MoneyCard, which opened the floodgates for many of Walmart’s un/underbanked consumers. With the MoneyCard, holders can:
  • Use it for purchases everywhere MasterCard or Visa debit cards are accepted in the U.S.
  • Deposit checks via their smartphone’s camera
  • Receive their wages by direct deposit from their employers
  • Write checks to pay rent and other bills requiring a paper check
  • Order personalized checks using the Walmart MoneyCard Mobile App
  • Pay bills for free with the online bill pay service
  • Send money for free to another participating card issued by Green Dot Bank (including the Walmart MoneyCard, of course)
  • There are no overdraft fees, at all and,
  • Cards are registered and protected against unauthorized transactions
Walmart MoneyCard holders earn cash-back rewards when they shop, including:
  • 3% cashback at
  • 2% cashback at Murphy USA and Walmart fuel stations
  • 1% cashback at Walmart stores
  • Up to $75 in cash-back rewards per reward year
All of which can be tracked around the clock in the Walmart MoneyCard App.

3.  The Money Transfer Play(s): Walmart2Walmart

In April 2014 Walmart launched its groundbreaking, in-store money transfer service for customers – a joint venture with Ria Financial – making money transfer simpler and cheaper for customers. This was launched in 4000 stores, promising to make the process of money transfer cheaper and more transparent for its consumer-base, and boy has it! Since then, customers have saved approximately $700 million on fees, enabling them to keep more of their hard-earned cash in their pockets for important things (like buying groceries… at Walmart). Customers can walk into any of the designated “money center” stores’ service desks (or start the process with the Walmart App and finalize in-store), complete a form with the transfer details (amount, recipient name, and state) and then can use cash or debit cards for payment. W2W then transfers the money to the intended recipient who can pick the cash up at any store in the specified state in a matter of minutes. No bank accounts needed at all and the service costs just $4 to send up to $50, $8 to spend between $51 and $1,000, and $16 to spend between $1,001 and $2,500. a.  The Mobile Money Transfer Play: Bluebird2Walmart Building on the success of Walmart2Walmart, in May of last year the retailer, broadened the offering (in conjunction with Ria and American Express) to help consumers save more money and time, still. Now, account holders of Bluebird – a checking and debit alternative – can send money online for cash pickup at Walmart stores. The recipient doesn’t even need to have a Bluebird account, they can just stroll into a store and pick up their cash within minutes of the transfer, and the service costs the same as the standard W2W service. b.  The International Money Transfer Play: Walmart2World Not satisfied there, two months ago Walmart expanded its money transfer service across geographic borders, aiming to serve 2 billion unbanked people across the globe, in partnership with MoneyGram. Now, consumers can transfer money from 4700 US stores in 10 minutes to 200 countries (for a flat fee), with funds delivered to agent locations around the world, an international bank, or mobile wallet accounts. As the VP of Walmart Services, Kirsty Ward, put it:
“There are millions of people sending money around the world to help loved ones with everyday needs or in times of emergency. Walmart2World, powered by MoneyGram helps customers get money to family and friends across the world in minutes, and the new low fees mean more of their hard-earned cash goes where it’s needed most.”
The Walmart MoneyCenters and Customer Service desks themselves have evolved well beyond the money transfer business. Now, customers can:
  • Cash checks
  • Pay bills
  • Make money orders
  • Get help preparing taxes
  • Sign up for pre-paid cards, and
  • Avail themselves of Pay with Cash

4.  The Employee Benefits Play

Walmart has invested heavily in improving conditions for workers since CEO Doug McMillan took over in 2014. Over the last two years, the company completed a $2.7 billion plan to do so, including wage raises and additional training. While it’d be lovely to think this was just out of the kindness of their hearts, there was, of course, a sound bottom-line incentive to the moves:
  1. happier, more stable, better-trained staff = better customer experience &
  2. more money in the pockets of its associates means they can spend more at Walmart (just like how Henry Ford’s wage raises enabled his employees to afford the cars they manufactured).
Heading into the Christmas week last year, Walmart announced a partnership with fintech start-ups Even and PayActiv, to provide a suite of tools for “financial wellness services” for its 1.4-odd million associates in the U.S. The company’s Chief People Officer, Jacqui Canney, noted:
“Traditional approaches to workforce well-being often focus solely on physical health, but we know from listening to our associates that financial well-being is just as important. We’re investing to give our people financial tools that help provide more stability in their lives, which we believe will empower them to be all they can be when they are at work serving our customers.”
This new tool will help associates with planning ahead for bills and savings goals, plus how much they have leftover for spending. Walmart has offered to cover the entire cost of financial management tech for both hourly and salaried associates and will ensure associates can use Instapay up to eight times per year for free (costs will be subsidized if associates need to use Instapay more than eight times in a year). The financial management and Instapay features will be available to all Walmart, Sam’s Club, and Walmart e-Commerce associates.


Since 1950, Walmart has understood the needs of their consumer at a visceral level.
The move into money services can be compared to the bread at a restaurant – it’s negligible revenue for them. The broader goal is defensive action against the approach of low-priced consumer goods competitors by building up an arsenal of products on the consumer side; every Walmart customer globally is an Amazon customer that could be taken away. Walmart’s desire, much like Amazon’s, is to become the nucleus of a person’s life in all aspects – groceries, personal and home goods, and now financial services.

While competing against the Amazon flywheel has been an uphill battle for Walmart, I honestly don’t think it’s beyond the realms of possibility to see Walmart “win” against (or at least not lose to) Amazon – it’s not easy to belt North America with physical locations, after all.
Original Source: LinkedIn

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