Walmart plans to support Visa Checkout despite a rocky relationship between the two giant companies whose recent disputes have often involved legal action.
But it's likely necessary to overlook those spats given the bigger prize at stake. As a conflict over swiped-card fees drags on in court, consumers are shifting away from plastic to make more purchases from digital channels. And it's not a perfectly smooth transition.
"Using tablets or smartphones to make an order is growing faster than [PC desktop web payments] ever did," said Richard Crone, a payments consultant. "But the abandonment rates are horrendous."
Walmart is expected to support Visa Checkout in May, according to an announcement from the card network on Tuesday morning. Other large merchants will immediately begin supporting Visa Checkout, including Starbucks, Walgreens, NFL Shop, HSN and Match.
These companies already support single click or 'One Touch' in-app purchases through PayPal. Starbucks also has a successful payment-enabled mobile app, which supports a growing number of services such as mobile ordering.
But these merchants' existing single click relationships don't cover the entire market, so extending the single-touch option to as many venues as possible makes sense, even if it isn't the merchant's primary mobile transaction brand.
"Visa's late to the party, but they have an opportunity to sign up customers as well," Crone said. "Even if the merchants have to accept somebody else's tender, they are ahead of the game if it increases sales."
Walmart was initially slow to adopt third-party digital wallets, due in part to its leading role in the Merchant Customer Exchange, a multi-retailer initiative developing a mobile wallet called CurrentC. In recent months, Walmart has made clear that it is willing to support other mobile payment efforts — including its own Walmart Pay — as it waits for CurrentC to come to market.
Shortly before Visa announced Walmart's support, the retail giant added MasterPass, MasterCard's single click in-app payment option.
Visa and Walmart did not return requests for comment by deadline. Any negotiation over terms of Walmart's pending support for Visa Checkout awkwardly accompany a very different set of negotiations to settle legal battles that mostly concern traditional in store plastic card payments.
Walmart has sued Visa over processing fees in a $5 billion case, and separately opted out of a $5.7 settlement with Visa and MasterCard in a case over allegedly fixed card swipe fees.
But there are enticements for Walmart to support Visa Checkout despite any bad blood. On the mobile in-app purchase side, Visa Checkout is massive—it has has 10 million consumer accounts and 600 supporting financial institutions in 16 countries. It has also reduced customer churn in earlier deployments.
According to comScore, enrolled Visa Checkout customers complete 86% of transactions from the online shopping cart and have a 51% higher conversion rate when compared to customers using a merchant's traditional online checkout. According to Visa, 45% of Visa Checkout users used a smartphone, tablet or other mobile device when making an digital purchase during the 2015 holiday period, up from 33% six months earlier; and more than 46% of customers who took advantage of a Visa Checkout promotion were new to that retailer.
"To the degree the ability to sell stuff is enhanced by the payment process, [the merchant] wins and to the degree that the payment process inhibits commerce, they lose," said Thad Peterson, a senior analyst at Aite Group. "Walmart clearly understands that differences aside, they can't not accept network payment instruments and if they can make acceptance easier, revenue increases."
The emergence of mobile online commerce also has a significant impact, Peterson said. "The smartphone form factor doesn't lend itself to a lot of data entry, unless you're 17, so 'one click' solutions are much more important than in the traditional e-commerce on a computer use case."