PayPal's tech and consumer reach melt Walmart's aversion to 'other' wallets
Walmart's PayPal cash service partnership is a previously unheard of mobile wallet collaboration for the retail chain, but a mass of underbanked consumers and a path to future innovation provide a distinct allure.
PayPal and Walmart are offering a cash-in and cash-out service from PayPal accounts within Walmart stores, with a $3 fee per service. PayPal's Mastercard customers will have the same capabilities within Walmart. PayPal cash-in service is immediately available at Walmart, and the PayPal cash-out will be available in all U.S. locations by early November.
"We have found that the underbanked and unbanked is really the new middle class," PayPal president and CEO Dan Schulman said during a Facebook Live presentation Thursday. "That many people not having access to the basic consumer financial transaction assets had to be addressed."
It's the first time Walmart will accept a third-party mobile wallet. Walmart, one of the founders of the defunct Merchant Customer Exchange that was created to counter the third party wallets, has accepted only Walmart Pay, rejecting other apps such as Apple Pay and Google Pay.
"Certain digital instruments are on the rise, but the one thing that has stayed stable in terms of usage has been cash," Daniel Eckert, senior vice president of Walmart services and digital acceleration, said during Thursday's presentation. "Customers know and trust cash, and they need to have a fluid means to onboard it to the digital economy, but also to offboard it. When you take these digital and physical assets together, it brings it to life in a different way."
PayPal has has long wanted to build a business in physical retail stores, but has not had much success. Previous relationships with Discover Card and phone number-and-PIN service with Home Depot and other retailers never resonated.
PayPal last year extended its deal with Discover to allow PayPal users to redeem Discover Cashback Bonus money through merchants accepting PayPal. The deal with Home Depot and others was halted earlier this year.
But those deals didn't directly target the financially underserved consumer. Now the powerful numbers of PayPal's 250 million active users are potentially engaged with one of the largest retailers on the planet. And vice versa for the 265 million customers who Walmart says visit their stores weekly. Many of these consumers will be exposed to the benefit of having a PayPal account.
PayPal has long thought technology could be an answer to that problem, Schulman added, but "we needed physical capabilities to put cash in and take it out."
Those capabilities now come for PayPal users at all Walmart point-of-sale terminals, the service desks, ATMs or those stores with special financial services centers.
The partnership sets the table for more cooperation between the two companies the future, particularly since Walmart.com was one of the first large e-commerce sites to accept PayPal, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
"They can extend that same thought process, of using the PayPal user base, to stimulate sales and reduce abandonment rates," Crone said of Walmart's strategy. "This is a pretty monumental announcement in that it is the first time an outside mobile wallet is being accepted by an MCX retailer in a material way."
Walmart was a leader in the Merchant Customer Exchange, or MCX, retailer coalition of the past five years, seeking a joint mobile wallet that would help retailers secure their customer data and bypass credit card interchange fees. The venture folded in 2016, not long after announcing its CurrentC mobile wallet would not launch. Walmart revealed Walmart Pay the same day.
For the time being, Walmart and PayPal have hit on a vital aspect of financial services, Crone added. "The ultimate utility of any account is cash access," he said. "And that's what they have done here."