Point of sale lender Affirm has added Walmart to its list of retail partners, giving Walmart customers the ability to take out short-term loans online or in-store when they check out and helping the U.S. retail giant further realize its banking dreams.

The payment option is available in every Walmart store and at Walmart-owned brands Allswell and Hayneedle on Wednesday, and will be available online and to other owned brands "in the coming weeks," Affirm CEO Max Levchin told Cheddar Tuesday. Customers can finance purchases between $150 and $2,000 with repayment terms of three, six, or 12 monthly installments.

The partnership, more than a year in the making, fits squarely with Affirm’s messaging about its ability to reinvent consumer credit in a more “honest” and transparent way (without hidden fees) than traditional branded credit cards. Walmart ($WMT) has the demographic Affirm claims to serve — creditworthy but underserved borrowers that the startup can assess with alternative data beyond FICO scores — but it’s too early to tell if Affirm will provide those customers with a healthier way to use credit, or if it will offer just another debt trap. Last summer Walmart ended a long-running card partnership with Synchrony Financial, an issuer of many popular store-branded credit cards.

Affirm has more than 2,000 live merchants worldwide and did more than $2 billion in loan volume in 2018. This new partnership extends its reach through 4,000 of Walmart’s brick-and-mortar stores. Levchin said some 30 percent of Affirm's user base are prime or super prime customers, but it appeals to customers across the credit spectrum.

“The rest of our borrowers are the rest of America,” Levchin said. “We bring the ability to underwrite and lend in the right amount for everyone without putting people in undue or necessary debt.”

Walmart has long understood the need to provide financial services to customers to make it easier for more of them to spend more money with the retailer. It tried becoming a bank a number of times so it could offer customers checking and savings accounts, among other things — first in 1999 when it tried to buy a one-branch thrift in Oklahoma, and most recently in 2006 when it applied for a banking license to establish an industrial loan company in Utah. Lawmakers and banking groups blocked future banking efforts by Walmart and tried to prohibit commercial companies from obtaining new ILC licenses.

Fast forward 10 years: non-bank companies generally don’t need to become regulated banks in order to act like banks (rival Amazon has demonstrated this better than any company). In 2015 Walmart launched Walmart Pay, the prepaid Walmart MoneyCard in partnership with banking-as-a-service company Green Dot that gives customers mobile check deposit, direct deposit from employers, and online bill pay, and doesn’t come with overdraft fees. The retailer has also launched an international remittance offering in partnership with Ria Financial called Walmart2Walmart (Walmart has 11,300 stores globally), and through partnerships with Even and PayActiv it’s offering a suite of “financial wellness services” for its employees. Affirm is just the latest strategic fintech partnership for the company.

“Part of why Walmart is excited to work with us is they serve America; for them it’s important to find a partner that doesn’t have a specific credit group or spectrum they’re focused on,” Levchin said.

Walmart declined to comment for this story.

According to Affirm, merchants see a 20 percent conversion lift and 87 percent increase in average order value when customers use Affirm. Levchin said it has most success in electronics, home and garden, automotive, furniture, and sporting goods. Alcohol, tobacco, groceries, pharmacy and personal care items, firearms, and money services are not eligible to be financed with Affirm.

“I don’t see it for trying to finance your groceries for the next ten weeks,” said Deirdre Ives, managing director of Wirecard North America. “It will drive flexibility of how to finance a meaningful purchase. If you want to entice a customer at the point of sale to return to the Costco or the Target or the Walmart vein, that’s really where integrating loyalty and couponing at the point of sale really drives that behavior.”

Walmart is America’s retail king — operating primarily through its 5,355 physical stores and going full speed ahead on digital experiences through partnerships and acquisitions — with $514.4 billion in revenue, compared to Amazon’s $232.9 billion or Costco’s $129 billion. Affirm initially got its name out to consumers through popular digital consumer brand partners like Peloton and Casper.

For Levchin, a PayPal co-founder and former member of the Consumer Financial Protection Bureau’s advisory board, the partnership shows that “the security and control that Affirm stands for is truly coming into its own.”

“There’s a whole generation of millennial and Gen-X buyers choosing control and transparency into what things will cost them,” he said. “I’m optimistic about the state of financial education in this country. In a place as massive and broadly popular as Walmart it endorses a certain way of life and belief their shoppers will benefit from it.”

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