Welcome back to another episode of Compound Interest from Semafor Business. I'm Liz Hoffman, Semafor's business and finance editor, joined as always by my colleague Rohan Jalaj. Hey Rohan.
Hi Liz. I have a question for you. You're older and financially more mature than me. Anyways, how many finance apps do you have on your phone right now? And follow-up, when was the last time you added another one to that collection?
I've got a million because I'm a very inefficient bank customer. Like I do one thing with a lot of — my mortgage is in a different place than my credit card, and I still have my Bank of America checking because I went to college in Boston. And so I've added things over the years, probably like 10 or 12. And then the last one I did download Rocket Money, and I did find that I was subscribing to too many things.
I remember you were very proud and pleasantly surprised when you downloaded that app and found that out. I ask because our guest this week is someone who you know very well, but our audience might not. I certainly don't. And that's Omar Ismail. He runs a Walmart-backed fintech called One Pay. But tell us a little bit about him.
So I met Omar 10 years ago, and he was at Goldman Sachs, and I was covering the bank right when they were building a consumer bank. I think when we met, they had just bought the bank deposit platform from General Electric, which sounds like a sentence from a Mad Libs in the '90s, but it is in fact a true thing that happened. And it became the core of a consumer bank ultimately called Marcus that Omar ended up being a senior executive in. He had actually been a private equity guy before, and Goldman had picked up a bunch of its private equity people and said, 'Well, you guys know how to build and run businesses. Go build and run this business.'
Omar left in 2021, I think. And you know, at the time, I would say Marcus was an interesting business. It was white space for Goldman, actually. I thought the product itself was pretty good. They built probably a billion-dollar revenue line at the time. It kind of started to fall apart after that and became, frankly, a distraction. They weren't getting enough credit for having this fast-growing fintech inside them anyway, and it was burning money, and they got wrong-footed a little bit on some credit underwriting issues and ultimately wound it down. But, you know, I think it was a good reminder of kind of what it takes to build a successful fintech and where the value-add really is. And so when he went to Walmart, they were talking at the time saying, 'What are we doing here?' He said, 'Well, ask me in a year.' And then I was like, 'What are we doing here?' He said, 'Ask me in a year.' And so we're actually finally going to have him on to ask him. They've been at it for about four years. They're out of stealth. They have a bunch of financial services products inside this app. But I still don't have a clear sense of what this thing is and where it's going and what makes it unique, what its competitive advantages are.
Well, solving that problem is going to happen in the present now. Omar's waiting for us. So why don't we take a quick break and let him in.
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Omar Ismail, welcome to the show.
Thanks for having me, Liz. It's good to see you. Nice to meet you, Rohan.
Let's start here. You've been at this four years or so at One Pay. And I think you spent a lot of that in what I think of as quasi-stealth, in that you have products, you have an app, you're out there in the world. You haven't talked that much about it. Tell us what you've been building.
So One Pay is a financial services super app, and our ambition is to help customers manage their money holistically. We want to help them with access to digital banking. We want to help them build their credit. We want to help them get access to credit. And we're building out a whole suite of financial products so that they can get everything that they want to do with their money in a one-stop shop. The original story of One Pay, as you said, we've been around for four years, goes back to someone that I'm sure you know, your audience knows, Sarah Friar. Sarah, formerly CFO of Block, currently CFO of OpenAI. But Sarah's a member of the Walmart board, and five years ago, almost six years ago now, she introduced Micky Malka, who is the founder and managing partner of Ribbit Capital, a very well-known fintech firm that's been around for 10 years, to the leadership at Walmart, to Doug McMillon, the then-CEO of Walmart, and John Furner, who was the CEO of Walmart US and now subsequently has become Walmart's global CEO. And really the idea was that if you think about Walmart — 200 million shoppers, two and a half million people who work at Walmart, 90% of the US lives within 10 miles of Walmart — this incredibly large ecosystem, and the idea of creating an independent company that is outside the four walls of Walmart, backed by Walmart and backed by Ribbit Capital, to be able to acquire customers into an open-loop financial services platform that can help customers manage their money holistically. That's the journey that we've been on at One Pay, and we're now four years in. We're at 7 million monthly active customers in the four years that we've been around. Today, you can get inside the One Pay platform, as I mentioned, access to a free digital banking account that can help you build your credit. You can get access to credit in the form of a credit card or an installment loan. You can invest in the app. You can buy crypto in the app. And just one of the key metrics for us, in addition to how many monthly active customers we have, is just the amount of payments. And today, roughly — that number again was zero four years ago because we hadn't started — is roughly $50 billion on an annualized basis. That's the amount of debit spend or credit spend or other forms of payment flow that our customers are doing through our platform.
How much of what you're offering in the app did you build yourselves? Is it native to you versus a wrapper for something else that you buy off the shelf and plug in in the back?
One product principle that we have, just to bring this to life, is we never want to ask the customer the answer to a question we already have. So for example, if you're a One Pay digital banking customer and you now want to sign up for the credit card, we already have all the information on you. We know your name, we know your address, we know your Social Security number. Maybe we need to ask you your income, as an example, because we don't have that, or something else, but we'll never ask you the answers to a question we already have. And so those are the types of north stars that we never wanted to compromise on. The second is just — I know this sounds incredibly easy to do, but how do you create products that are actually simple and personalized and give customers value? Again, something we did not want to compromise on. When you then go down to how do you want to offer those products, it's a very case-by-case decision as to how much of the stack do we own versus do we want to partner with someone in terms of offering it. If you think about the extremes, digital banking, as an example, we are not a bank ourselves. We partner with licensed banks, Coastal Community Bank and Lead Bank. But if you think about the stack, we own a lot of it, again, other than being the actual licensed bank, because we partner with them. So in terms of fraud, operations, onboarding, servicing, you know, those are things that our team does. If you think about our invest product, as an example, we decided to become an introducing broker-dealer, again, because we did not want to compromise on those north stars. But we've partnered with DriveWealth, which is a clearing broker-dealer where they own a lot of the trading and the execution and things that we don't want to own. Credit is another example that's probably a little bit somewhere in the middle. Our experience, but we decided strategically that we did not want to own the risk and the balance sheet. And so our brand, our experience, we own the customer data in a way that we can offer this integrated experience. Well, we've partnered with Klarna. You had Sebastian on your program not too long ago, who we have a great partnership with. We partner with Sebastian on installment loans, and we've partnered with Synchrony to offer credit cards to our customers. So it's very case-by-case without compromising on a north star.
You mentioned the two million employees that Walmart has. Is the idea that you guys are almost a credit union for those employees? I mean, how many of that employee base has signed up for One Pay now?
I was rounding, but a million and a half employees who work at Walmart and a couple hundred million folks who shop at Walmart, both in store and online. We want to acquire as many of those customers as possible by giving them these incredibly simple and valuable and innovative financial solutions in order to bring them into our ecosystem. So I'll give you an example. Let's say you're an associate — that's what Walmart calls its employees. You're an associate that's starting at Walmart. And when you are going into Walmart's HR ecosystem, just to set up all of your benefits, you have the ability to get your paycheck into any bank that you want to get your paycheck into, but we will give you a prompt to sign up for One Pay while you're in Walmart's HR ecosystem. Two clicks. It is 20 seconds and the fastest digital banking onboarding you will ever see because Walmart already has all the data on you. With your permission, they will pass it on to One Pay, and we can sign you up for a digital banking account. Take another example of someone who happens to be a Walmart shopper. Let's say you happen to be on walmart.com and you want to buy a bike for your son or for your daughter. The bike costs $250, and you don't want to pay for it upfront. It makes sense to get an installment loan. You will see the ability to onboard and sign up for One Pay Later. And again, that will be an incredibly fast digital onboarding for you to become a One Pay customer. Once you have become a One Pay customer, we are incredibly focused on owning as much of your holistic wallet across all of the different financial products that we offer you. So what happens with our customers is one of the things that we measure is how many features of ours are you using. On average today, that number is over two, and over long periods of time, we want that number to become three, four, five, six.
You know, there's a lot of people out there trying to build a financial super app, but in some ways, JPMorgan Chase is a financial super app. I can send money, I can do investments, I can apply for a loan, I can do a lot of things right on the app. Like, who is going to win this, and why does One Pay and Walmart have a right to play there?
I think there are a couple of different competitive moats, Liz, that we are very focused on that we believe give us a right to win. The first is access to distribution. We have the ability to acquire customers at zero CAC through the Walmart ecosystem. And by the way, it's not just distribution that's a competitive moat. It's also the ability to use data with the customer's permission to be able to offer them products that are catered to you. I think distribution and data are incredible moats for us to continue to grow and win in a world in which, if you look at every fintech that's out there, customer acquisition cost tends to be one of the largest line items in a company's P&L.
It's where they go sideways. It's just too expensive to get customers, right?
It's way too expensive. The second thing I'd say about large banks and where we think about fintech competing with large banks: there's no question that the first chapter of fintech has been about lots of point-to-point solutions, single-product companies that have done quite nicely — digital banking, buy now pay later, ability to invest, ability to buy crypto. But as customer acquisition costs have continued to go high, and by the way, there's a lot of research that shows customers are overwhelmed by having to manage 15, 20, 25 different financial services relationships. So the idea of being able to consolidate them in a one-stop shop, there's overwhelming research that shows customers want that. And then the final thing I'd say about fintech and just where we are in the journey, despite everything that's happened over the last 10, 15 years and customers being pretty unhappy and low NPS scores with banks and legacy financial services institutions, fintech is still only 3, 4, 5% of the digital banking market share, and the highest number in fintech market share is payments, which is at 10%. And so I believe, we believe, we're kind of still a little bit in the first innings of where this goes over the course of the next few years and decades.
But isn't the less charitable view of that, that we've been at this a long time, people are unhappy with their legacy products? Isn't there a grimmer view of this that there may be some behavior here that's just too sticky to change?
I don't believe it's going to be a winner-take-all market. So I do believe that legacy financial services institutions and banks will continue to exist and grow, for sure. But I do believe that part of the issue has been just how hard it is to acquire customers.
Why make this an independent thing instead of doing this in-house?
I give Doug and John an incredible amount of credit for the structure that they created. Really a recognition on their part that they have some strong competitive advantages in order to build a business and have a right to win in financial services, but also a recognition that it is hard to start a business and innovate a business inside the four walls of a corporate, particularly when you have priorities one, two, three, four that are going to take precedence. If you think about Walmart, they're growing their retail business. They've been executing on e-commerce and third-party marketplace and their membership business. They have had attempts in healthcare. Just a recognition that we need to do this outside of our four walls if we want to find the right talent and make sure that this business does not get lost. The second thing I'd say, which is really important and has served us really well, is Ribbit was not just a financial investor. Ribbit's been around for 10 years. Micky is a four-time fintech entrepreneur himself, 150 portfolio companies globally in financial services — Nubank, Revolut, PhonePe — here in the US, businesses like Affirm and Coinbase and Robinhood. So just a great network and experience set in terms of what it takes to win in financial services. And then the final thing, Rohan, I'd say about why do it outside of the four walls is also that the platform that we have is open-loop. So of course we rely heavily today on Walmart from a customer acquisition standpoint. But we've also struck partnerships very recently that are about to go live by the end of the year with other employer ecosystems where we can take the same playbook that we did with Walmart now inside of UKG and Workday that have 30 to 40 million employees that are using those platforms as a way to acquire customers into One Pay banking.
Safe to say you're not allowed to do this at Target?
We're very focused on acquiring customers inside of Walmart, acquiring customers in other employer ecosystems as I mentioned, like UKG and Workday, as well as acquiring customers directly, just like any other fintech would.
I've spent 10 years trying to get you off your talking points, and I've failed every time. But to be clear, Walmart's in the business of selling stuff, and they want to sell more stuff. So when they think about, you know, maybe you build a huge business and they have a nice equity return on their investment here, but what is it that feeds back into their basic business of retail?
I will let Walmart answer that question. I don't want to speak for Walmart. I can speak to One Pay's strategy. You know, Walmart is a majority owner of this company. By virtue of the fact that we acquire customers at Walmart, and for our open-loop products like our credit card and our debit card, we offer extra value proposition for our customers to use our products there. You get extra rewards. You know, our customers are loyal to Walmart, but they spend everywhere. And that has been kind of the strategy from the start.
We have recurring income that is transaction-driven. For our banking customers, we have deposits. We share some of that obviously with our bank partners, but we make money on deposits. Our products are fee-free, but for certain features there might be a fee associated with it. So it tends to be a combination of recurring transactional revenue, money on things like deposits, and then some fee revenue.
And because we try to ask this on every — somehow we've hit this question on every episode. What is the TAM here?
We are incredibly proud, Liz, of the 7 million customers that we have today, but from a TAM standpoint, our ambition is how do we serve tens of millions, you know, hopefully hundreds of millions of customers in their financial journey.
Okay. So hundreds of millions, or let's say tens of millions of customers. JPMorgan has tens of millions of customers. It's got $300 billion of revenue, I think. Like, how big could this thing be?
I will let you do the math.
I'm a journalist. It's very dangerous.
You're talking to two liberal arts majors here. You do not want us doing math, Omar.
You're right. I would say long way to go. I'm not going to put a number in terms of TAM or revenue today. This is the part where we actually have benefited from being pretty discreet, but feel good about the growth that we have, again, given where we started and where we're going, and hopefully continue to scale.
That feels like a good place to take a break. We'll be right back with more from Omar.
Welcome to What's Working, the show within a show featuring Compound Interest season partner Amazon Business. I'm your host Rachel Oppenheim, joined by Amazon Business VP of Technology Doug Gray. Welcome back, Doug.
Amazon to me is known as being one of the most customer-obsessed companies on the planet. Are there any specific customer stories that are just exceptional that you'd be open to sharing here today?
Thanks, Rachel. Hearing from our customers about their real-world stories really inspires us to keep innovating. So, picture Kodiak Island. It's an island 250 miles south of Anchorage. It's reachable only by plane or ferry. Now imagine the challenges of operating a hotel there year-round in a place so remote. They have very few local vendors, unpredictable delivery schedules, and it's Alaska, so weather shifts overnight. Even simple items like light bulbs or cleaning supplies take days to arrive. So they now rely on Amazon Business's tracking and reorder tools to anticipate their needs weeks in advance. Amazon Business integrated into their process, providing the products they needed, from guest amenities and cleaning supplies to operational essentials, all at low prices and with delivery they can count on. Predictable deliveries and real-time tracking have helped Best Western staff keep critical departments running without interruption. For them, the ability to operate with consistency and calm is transformative because it allows them to focus on what really matters: their customers.
Most of the successful fintechs today started out with a single product and did that really well. Became known, had a flagship product — for Klarna that was buy now pay later, SoFi that was peer-to-peer loans, right? And then they built an ecosystem around that. And it seems to me that you are not doing that. You have a bunch of things, none of which are obviously the flagship product, to me at least. I'm curious whether you think that that's just a better approach.
We are not a single-product company. We are focused on multi-products and an integrated experience across all of those products. And two, we have a competitive advantage and cost advantage on distribution, which means we can give value back to the customer and have better unit economics. And so those are two very key differences relative to a world in which customers are underserved and not happy with their traditional banks. You can have a competitive advantage on distribution, and you can create a one-stop shop and a multi-product experience. Those are the three things that underpin our strategy. And in that regard, different than a lot of other competitors in the space, and I think has allowed us to, under the radar, pretty quietly scale into a top-10 finance app in the country.
You built a fintech inside Goldman Sachs. What did you take away from that that you're applying here?
First of all, you and I got to know each other at Goldman. I left at the end of 2020. You know, personally very proud of what we built in the five years that we were there. Not a lot of people gave us a shot of actually being able to get it off the ground. And when I left in 2020, you know, the business had a billion dollars of revenue and roughly 10 million customers, a thousand employees across the firm. But also a lot of battle scars to prove how hard it is to innovate and build something inside the four walls of a large corporate. One is just the structure that we have here is deliberately different. We can hire the right team. We have the benefit of Ribbit and their expertise, and yet have all of the competitive advantages that come with being attached to and having a lead investor and a Fortune 1. We're not doing this inside the One Pay office today, but if you came to the One Pay office — and we'll have both of you — there's a very, very hard-to-miss giant rabbit statue that greets you the second you get out of the elevator.
