The Walmart-backed fintech One offers the option to buy now and pay later

Walmart Majority-owned fintech startup One has begun offering buy-now-pay-later loans for big-ticket items at some of the U.S. retailer's more than 4,600 stores, CNBC has learned.

This move puts One in direct competition with Confirmsthe leader in BNPL and the exclusive provider of installment loans to Walmart customers since 2019. It's a relationship the Bentonville, Arkansas-based retailer recently expanded, offering Affirm as a payment option at Walmart self-checkout kiosks.

It also likely signals that a battle is brewing in the store aisles and e-commerce portals of America's largest retailers. The role played by a wide range of players is at stake, from fintech companies to card companies and incumbent banks.

One's push into lending is the clearest sign yet of its ambition to become a financial super app, a mobile one-stop-shop for saving, spending and borrowing money.

Since it burst onto the scene in 2021, it has attracted Goldman Sachs Veteran Omar Ismail as CEO, the fintech startup has intrigued and threatened a bank-dominated financial landscape — and stolen talent from more established lenders and payments companies.

But the company, based in Manhattan's cramped WeWork space, has mostly operated in stealth mode while developing its early products, including a debit account released in 2022.

Now, One goes head-to-head with some of Walmart's existing partners like Affirm, which helped the retail giant generate $648 billion in revenue last year.

On a recent visit by CNBC to a New Jersey Walmart location, One and Affirm ads competed for attention among Apple products and Android smartphones in the store's electronics section.

Offers from both One and Affirm were available at checkout, and loans from either provider were available for purchases starting at about $100 and costing up to several thousand dollars with annual interest rates ranging from 10% to 36%, according to their respective websites . .

Electronics, jewelry, power tools and auto accessories are eligible for loans, while groceries, alcohol and weapons are not.

Buy now, pay later has gained popularity with consumers for everyday items as well as larger purchases. From January to March of this year, BNPL generated $19.2 billion in online spending, according to Adobe Analytics. This is an increase of 12% year over year.

Walmart and One declined to comment for this article.

The person's expanding role at Walmart raises the possibility that the company will force confirmation, Capital One and other third parties from some of the most desirable partnerships in U.S. retail, according to industry experts.

“I have to imagine the goal is to take all of these things, whether it's a credit card, buy now, pay off loans or transfers later, and unify them all into an app under one brand, and deliver them online and through Walmart's physical footprint,” he said. Jason Mikula, a consultant who previously worked in Goldman's consumer division.

Affirm declined to comment on its partnership with Walmart. Affirm shares rose 3% on Tuesday, rebounding after falling more than 8% in premarket activity.

For Walmart, One is part of its broader effort to develop new revenue streams outside of retail stores in areas including finance and health care, following competitors. Amazon Playbook with cloud computing and live streaming, among other sectors. Walmart's newer businesses have higher profit margins than retail and are part of its plan to grow profits faster than sales.

In February, Walmart said it bought TV maker Vizio for $2.3 billion to boost its advertising business, another growth area for the retailer.

When it comes to finance, the One is just Walmart's latest attempt to break into the banking business. Beginning in the 1990s, Walmart made repeated efforts to enter the industry through direct ownership of a banking arm, each time being blocked by lawmakers and industry groups concerned that a “Wal-Mart Bank” would crush smaller lenders and squeeze larger lenders.

To avoid these concerns, Walmart took a more conservative approach this time. For One, the retailer has set up a joint venture with investment firm Ribbit Capital – known for backing fintech companies including… Robin Hood, Credit Karma and Afirm – staffing the company with executives from various finance sectors.

Walmart did not disclose the size of its investment in One.

The startup said it makes decisions independently of Walmart, although its board includes Walmart USA CEO John Furner and its CFO John David Rennie.

One of them does not have a banking license, but partners with Coastal Community Bank for debit card and installment loans.

After its early failed attempts at banking, Walmart pursued a partnership strategy, teaming up with a constellation of providers, including Capital One and Walmart Inc. synchronization, moneygram, Green dotAnd recently, it was confirmed. Drawing on partners, the retailer has opened thousands of physical MoneyCenter locations within its stores to offer check cashing, sending and receiving payments, and tax services.

But Walmart and One executives have made no secret of their ambition to become a major player in financial services by overtaking existing players with a clean effort.

The no-fee approach is especially important for low- and middle-income Americans who are “financially underserved,” says Rainey, a former business management expert. PayPal Executive, during a conference held in December.

“We see a lot of that demographic of customers, so I think that gives us the ability to participate in this space maybe in a way that others don't,” Rennie said. “We can digitize a lot of the services we actually do today. One of them is the platform for that.”

One could generate nearly $1.6 billion in annual revenue from debit cards and lending in the near term, and more than $4 billion if they expand into investing and other areas, according to Morgan Stanley.

Walmart can use its scale to grow One in other ways. It's the largest private employer in the U.S. with about 1.6 million employees, and it already offers its workers early access to wages if they sign up for the corporate version of One.

There are signs that the bank is making a deeper push into lending beyond installment loans.

Walmart recently prevailed in a legal dispute with… Capital One, allowing the retailer to end its credit card partnership years ahead of schedule. Walmart sued Capital One last year, alleging that its exclusive partnership with the card issuer was invalid after it failed to meet contractual obligations related to customer service, assertions that Capital One denied.

The lawsuit has led to speculation that Walmart intends for One to take over management of the retailer's co-branded and store cards. In fact, Capital One itself claimed, in legal filings, that Walmart's rationale was less about servicing complaints and more about transferring transactions to a company it owns.

“Upon information and belief, Walmart intends to offer its credit cards through One in the future,” Capital One said last year in response to Walmart's lawsuit. “With One, Walmart positions itself to compete directly with Capital One to provide credit and payment products to Walmart customers.”

Capital One said last month that it could appeal the decision. The company declined to comment further.

Meanwhile, Walmart said last year, when its lawsuit became public, that it would soon announce a new credit card option with “meaningful benefits and rewards.”

One has lending licenses that allow it to operate in nearly every U.S. state, according to filings and its website. The company's app tells users that credit building and credit score monitoring services will be available soon.

While One's expansion threatens to displace Walmart's existing financial partners, Walmart's efforts can also be viewed as defensive.

FinTech players including Blog Cash App, PayPal and Chime dominate account growth among people switching bank accounts and have made inroads with Walmart's core demographic. The three services accounted for 60% of digital gamer subscriptions last year, according to data and consulting firm Curinos.

But One has the advantage of being majority owned by a company whose customers make more than 200 million visits weekly.

It can offer them inducements including 3% cash back on Walmart purchases and a savings account that pays 5% interest annually, much higher than most banks, according to customer emails from One.

These terms keep customers spending and saving within the Walmart ecosystem and help the retailer better understand them. Morgan Stanley For 2022, analysts said in a research note.

“One has access to Walmart's large, established customer base, the largest in retail,” the analysts wrote. “This captive and underserved customer base gives One an advantage over other fintech companies.”