Power of Payments Ep. 20: Walmart’s interest in BNPL, Stripe’s fiat-to-crypto widget, and more
- This week, we discuss Walmart’s growing interest in BNPL and financial services, and Stripe’s new fiat-to-crypto payment offering.
- We also talk about Wise and Deel’s new feature for global payroll, and the potential benefits and pitfalls of FedNow for B2B payments.
Welcome back to the Power of Payments podcast. I’m your host Ismail Umar, and in today’s episode, we will discuss Walmart’s growing interest in BNPL and financial services, and Stripe’s new fiat-to-crypto payment offering. We will also talk about Wise and Deel’s new feature for global payroll, and the potential benefits and pitfalls of FedNow for B2B payments.
If you’d like to stay updated on all our payments coverage, be sure to subscribe to our Payments Newsletter.
The following excerpts were edited for clarity.
Walmart’s growing interest in BNPL
CNBC recently reported that a Walmart-backed fintech startup called ‘One’ is planning to launch a BNPL service in 2023, which shoppers will be able to use at Walmart’s website and physical stores, as well as at other retailers.
The installment payment option will be added alongside the checking accounts, savings accounts, and debit cards that are already offered by One.
One operates as an independent firm, but is majority-owned by Walmart, and aims to develop affordable financial solutions targeting Walmart’s customers and employees.
One is led by Omer Ismail, who previously led Goldman Sachs’ consumer bank. Its leadership also includes some other former Goldman executives.
Walmart's investment in One is not a surprising step for the retail giant. Being the country’s largest private employer and its biggest grocer, it has, for a long time, offered financial services at many of its stores. It has a money center where customers can go for banking-related services, such as printing checks, sending or receiving money, or loading prepaid debit cards.
Many of these services are geared towards lower-income families that don’t have relationships with a traditional bank or don’t have the credit history to qualify for credit cards. These consumers may be attracted to a flexible payment option like BNPL, particularly in the current environment of high inflation and a challenging macroeconomic climate.
Additionally, Walmart CEO Doug McMillon spoke recently about even wealthier consumers being strongly affected by inflation, which could mean that they may also be looking towards BNPL as an alternative payment option.
Of course, this is not Walmart’s first venture into BNPL. Walmart currently offers BNPL loans through a partnership with Affirm that dates all the way back to 2019. At this point in time, it’s unclear how the new BNPL product from One will affect the existing offering with Affirm.
Would Walmart still maintain the Affirm partnership? We don’t know the answer to that yet.
What we do know is that One’s new product could allow Walmart to grab a bigger slice of the US BNPL market. Since Walmart has majority ownership of One, that means it could keep a bigger share of the income from transactions, rather than having to share revenues with a provider like Affirm.
Affirm’s shares also dipped following the news of One’s BNPL offering.
One’s installment plan could encourage spending at Walmart from customers who want more payment flexibility. It might also help attract new customers who were curious about BNPL, but didn’t really trust unfamiliar fintechs and wanted the backing of a more established brand like Walmart.
So far this holiday season, despite the inflation, consumers have been making record levels of purchases, thanks in part to BNPL apps. BNPL orders jumped 85% in the period between Thanksgiving and Cyber Monday, compared with a week before, according to data from Adobe.
Over 10% of Black Friday online shoppers used BNPL this year, up from around 8% last year, and around 4% in 2020, according to another study by PYMNTS.
Despite the currently high demand for BNPL, Walmart would also have to contend with the stronger regulatory oversight that’s likely to arrive in the US, which could affect BNPL growth.
Walmart would be opening itself up to potential complications tied to concerns that BNPL can lead to overspending and add to consumer debt, particularly among younger shoppers, who may be more likely to miss payments and be generally less aware of the financial risks associated with BNPL.
Stripe launches fiat-to-crypto widget to simplify Web3 purchases
Stripe recently launched a product that will facilitate fiat-to-crypto payments for Web3 companies. The new offering is a customizable widget that can be embedded into a decentralized exchange, NFT platform, wallet, or decentralized app, and allows customers to instantly purchase crypto in Web3 apps.
Currently, if consumers want to onramp fiat-to-crypto, they need to buy cryptocurrencies through a centralized exchange like Coinbase, Binance, or Kraken. They then have to transfer the crypto assets to a third-party wallet in order to buy Web3 services.
Stripe’s new offering helps make this process much simpler. The firm says it will also handle KYC, payments, fraud and compliance issues, removing the need to integrate multiple third-party services.
The new product is currently only available for US customers, but will be offered in other countries over time. The onramp has already been deployed by 16 partners, according to Stripe. These include blockchain-based music streaming platform Audius, NFT marketplace Magic Eden, and Ethereum wallet Argent.
Stripe’s product manager, Jennifer Lee, acknowledged in a company blog post that the crypto industry has been in a tough spot lately, but she added that Stripe remains optimistic about the industry’s potential and future prospects.
She wrote: “It’s been a difficult few weeks in the crypto ecosystem. However, despite recent events, we remain excited about the underlying prospects for innovation. Overall, we maintain fundamental optimism about how crypto can help to facilitate a more globally accessible financial services ecosystem.”
Stripe isn’t the first company to come up with a fiat-to-crypto onramp — a few other firms like MoonPay and Ramp are already offering similar services. However, as a major industry player that processes payments for brand names like Apple and Walmart, Stripe’s entry into this space could serve as an important step in increasing the accessibility of DeFi for mainstream consumers.
The timing of the launch also seems consequential. Ever since FTX imploded, centralized exchanges have been under growing scrutiny, and are faced with shrinking investor confidence. By making it possible to circumvent centralized exchanges, this type of offering could potentially ease some investor fears and bring a broader audience into the space.
FedNow’s potential benefits and pitfalls for B2B payments
In the next six to eight months, the Federal Reserve will start rolling out FedNow, its new instant payment service. Unlike its pending CBDC project, FedNow services will use the existing financial infrastructure to help FIs enable real-time payments.
Right now, over a hundred banks and payment processors are participating in FedNow’s pilot program. Upon release, the Fed’s countrywide RTP network initiative is expected to become one of the biggest payment and clearance settlement systems in the world.
The initial rollout of FedNow, as with any new tech, has a few wrinkles that need ironing out. Tearsheet sat down with Balaji Devarasetty, chief information officer at Paya, to discuss the benefits and potential pitfalls of implementing FedNow’s RTP for B2B transactions.
Devarasetty says FedNow offers an alternative to payment solutions such as ACH, which has been around since the early ‘70s. ACH is currently the preferred B2B payment method because of its cost-effectiveness. Although it moves close to $50 trillion annually within the US, the system is over 50 years old.
In essence, ACH is a ‘file-based’ system – modeled after paper-based filing systems – which explains why it takes three to five working days to process transactions.
FedNow aims to address the limitations of a file-based system by incorporating the clearing functionality into the payments settling process. Using existing payment rails, it aims to increase accessibility and efficiency in payment transactions.
Instant transactions will help businesses to better manage their cash flow, and consumers will benefit in times of emergency expenses, among other things. Additionally, FedNow will operate all year round, including on weekends and bank holidays.
However, in reality, execution can make or break the perfect tech solution. Devarasetty also identified the potential problems around implementing FedNow services in B2B transactions.
The first issue is that only around 120 out of over 4,200 FDIC-insured commercial banks in the US have joined the FedNow pilot program. That means adoption could take some time – Devarasetty suggests it could take well over two years post-launch to onboard all the banks into the new system.
The second issue is that FedNow will only roll out to registered banks. In other words, merchants, consumers, or non-bank payment service providers will have to access the service through bank partnerships. And that means fintechs will have to jump through technical hoops to enable FedNow as a payment alternative for their customers.
Finally, the most challenging aspect of FedNow for B2B payments providers is the initial $100,000 credit limit set by the Fed, adjustable up to $500,000.
Having thought through some of these issues, reserve banks will offer a liquidity management tool alongside the FedNow Service. This will allow non-banks and consumers to transfer funds instantly amongst each other. In addition, they will waive customer credit transfer fees for 2023.
Wise and Deel's new feature for global payroll
Last month, Deel, a payroll and HR platform, collaborated with Wise to create a feature that would make it easier for customers to transfer funds for payroll through Wise, using just their email address. They’re also now able to fund payroll transfers with 19 different currencies, giving customers more choice in the currencies that they prefer.
Prior to this, Deel customers had to deal with a longer transfer process, including adding information like the account number, routing number and account type, and waiting for it to get through.
Wise is currently live with over 50 banks and businesses to facilitate cross-border payments.
The company recently announced that it had almost tripled its profits in the past six months, as more customers turned to Wise to move their money cross-border. The firm announced it had moved £51 billion for its customers in the six months leading up to October, which was 49% more than the total amount sent during the same period last year.
As companies’ operations, workforce and plans become increasingly global, they’re looking for more flexible payment options. SWIFT, for example, reported that sign-ups for its cross-border payments product SWIFT Go tripled since its launch back in 2021.
In general, SMBs are increasingly turning to cross-border payment options to stay on top of things, according to a report by Mastercard. Around 80% of SMBs say they feel comfortable using online cross-border solutions, and that digital cross-border payments platforms help improve their business efficiency.
This trend means that SMB service providers and large banks need to shift their offerings to accommodate and better serve business needs. It’s becoming critical that providers offer simple and convenient solutions that allow businesses to pay employees in the currency that works best for them, regardless of the country or region they’re based in.