Retail banking, indeed.
News this weekend that Walmart had poached two executives from Goldman to join the commerce giant’s FinTech efforts shines a spotlight on the allure and challenges of developing super apps — and especially of adding banking into the mix.
Might the moves usher in a new version of “retail” banking — where everything from deposits to mortgage applications to investing is available to the consumer, while (conceivably) browsing the aisles at the big-box retailer?
In further evidence of what may lie in store, and as reported, Walmart has added Goldman executives Omer Ismail and David Stark to its ranks.
As noted in this space late last month, Ismail had formally taken on the control of the consumer bank at the start of 2021, and had been playing a major role with crafting the strategy for Goldman’s own digital, “main street” banking efforts through Marcus. Stark had been working with Goldman on its credit card efforts with Apple.
Now, two defections do not a deluge make. And it would be premature to read into the news that Goldman’s digital banking efforts are faltering, spurring those two execs to jump ship. In fact, in the latest quarterly earnings release, Goldman said in January that Marcus deposits stood at $97 billion at the end of the year. The company is targeting $125 billion in deposits by the end of 2024, and loans tied to its cards are being targeted at $20 billion within the same timeframe.
With a nod toward the competitive landscape and to FinTechs, CEO David Solomon maintained that Goldman has a “more integrated offering” than competitors, as we reported when earnings were announced. Having a proprietary platform in place, along with Goldman’s history of strong corporate relationships, opens up the potential for partnerships in building out digital initiatives focused on the consumer.
“We continue to get feedback that the state-of-the-art product platform and the digital applications that we have are really excellent by any standards,” said Solomon during the call, adding, “we’re going to continue to move forward with that long-term strategy.” More recent announcements have focused on Marcus Invest, aimed at automated stock buying.
For Walmart, the FinTech initiative would further the company’s stated goals of developing a super app, where CEO Doug McMillon has stated that such an app would be a “primary destination” for its customers, spanning physical and online interactions. We’ve already seen the expansion of services to be offered online, and thus through apps: The company is working with Shopify for a third-party marketplace, and “buy now, pay later” (BNPL) options with Affirm.
The super app, at a high level, would, as Karen Webster noted late last month, offer an umbrella of services that are critical to daily life, from finance to commerce to health care, with payments, of course, woven tightly into the fabric of it all.
We’ll put a spin on an old saying: Familiarity breeds content. And by “content” we don’t necessarily mean streaming media — we mean something closer to “contentment,” a level of trust that opens the door for trusted brands to deliver more options to its end users, in a continuum of services that provide frictionless encounters for customers but also cement relationships between users and super apps.
Certainly there is a level of familiarity with Walmart, given the ubiquity of the company’s super centers and the eCommerce explosion that has marked the great digital shift spurred by the pandemic. The urgency to expand services and offerings beyond a retail setting is there for Walmart, as Webster noted, where retail spend and overall consumer spend positioning has waxed and waned when compared to Amazon’s, though Amazon buy and large has maintained a sizable lead. PYMNTS data has shown that for the first week of January, 64.3 percent of U.S. consumers were Amazon Prime subscribers, compared to 21 percent who belonged to Walmart+. It’s a step up from November, which showed Amazon at 68 percent and Walmart at just 17 percent.
Diversify, Diversify, Diversify
Thus, the old maxim of investing applies to the digital age, when it comes to capturing top-line growth: Diversify, diversify, diversify.
The quickest way to diversification, for Walmart and others, to crystalizing an ecosystem, may be through banking and investing geared toward the masses. After all, consumer spending and saving (via, say, stimulus checks) has held up through the pandemic, and platforms such as Robinhood have sought to level the playing field, in terms of gaining access to (at least basic) trading and investing opportunities while reducing the associated fees or eliminating them entirely. Square, in another example, has been looking to broaden its services through Cash App (where bitcoin related transactions, and rewards related to the cryptos, are gaining steam). Greendot has been building its digital bank for consumers and small businesses, through GO2bank, an FDIC-insured mobile banking app that spans prepaid, debit and checking activities, among other offerings.
Bloomberg noted this week that at the end of last year, the Federal Deposit Insurance Corp. approved a final rule that makes it easier for non banking firms to get banking charters (and, by extension, compete against banks). Back in the middle of last year, as the pandemic ravaged everyday life, a PYMNTS survey of 3,000 U.S. consumers who have at least one credit or debit card and mobile device revealed that 24 percent of respondents would be “very” or “extremely” likely to switch to the new generation of banking. Another 48 percent said they would be “somewhat” likely to open accounts with these companies — Amazon, Apple or Google.
The age of app-driven finance, then, with the biggest of the big names behind them, is truly upon us.