The U.S. push to electronify payments is taking on a new twist as the nation's largest retailer begins welcoming cash for online purchases.

Wal-Mart Stores Inc. on April 26 introduced a "Pay with Cash" feature to enable customers that lack a credit, debit or prepaid card to pay for online purchases with cash inside its stores.

To use the new option, customers shop online through When checking out using the "Pay with Cash" feature, they receive an order number and an emailed receipt. They can present the order number at any Wal-Mart store within 48 hours to complete the transaction by paying with cash, and Wal-Mart ships their online purchase to them, the company says.

Wal-Mart designed the service to increase purchase options for unbanked or underbanked customers that lack access to payment cards or are uncomfortable paying online, a company spokesperson tells PaymentsSource.

Getting around interchange fees is not one of the reasons behind Wal-Mart's new cash-pay initiative, the spokesperson insists.

"Customers have told us they want to shop online and pay with cash, and we can give those customers access to hundreds of thousands more products online than what we carry in our stores," the spokesperson says.

Wal-Mart's move may indeed position it to capture new transaction activity in a relatively flat market by exploiting its broad retail footprint and its higher-than-average proportion of customers paying with cash, Patricia Hewitt, a director with Mercator Advisory Service, suggests.

And in opening up new sales channels for cash transactions, Wal-Mart is taking the lead in a growing movement, she says.

"Cash is becoming increasingly important to U.S. merchants because there are not many avenues left for new sales growth," Hewitt says. "By adding cash options for online purchases, Wal-Mart has found a way to expand its ramp to new sales it would not otherwise have."

And Wal-Mart is not necessarily taking a step backward in overall efforts to electronify payments, Beth Robertson, director of payments research with Javelin Strategy & Research, tells PaymentsSource.

"This is a way to draw the cash customer into e-commerce and build transaction volume," which eventually could lead to converting customers to other payment channels online, she suggests.

Wal-Mart is not the only operator opening up cash payments for online sales.

ZipZap Inc. in March added MoneyGram International's 35,000 sites in the U.S. for consumers who prefer to pay for online purchase with cash (see story).

And PayNearMe Inc., which enables consumers to make cash payments to billers and merchants at 7-Eleven Inc. stores, early this year announced plans to take its service mobile (see story).

Wal-Mart is taking advantage of its somewhat unusual customer profile in accepting cash payments for online purchases.

The majority of Wal-Mart's store sales are comprised of cash or debit card purchases, Wal-Mart said in a press release. Only 15% of all store sales are initiated with credit cards, the company says.

"In a survey we conducted, more than two-thirds of Wal-Mart customers said they would likely pay in cash for online purchases if that option were made available," the Wal-Mart spokesperson says. Respondents also said they likely would use cash to pay for electronics, as well as grocery, health and beauty items purchases online, he says.

Though Wal-Mart's move goes against well-documented efforts by banks and merchants to reduce cash-handling, which can be costly and make merchants vulnerable to theft, the actual costs of managing cash are "a gray area," Hewitt says.

"The cost of handling cash varies by perspective, whether you're taking it in or distributing it, and there is little solid research on how much more it costs banks or merchants to handle it versus electronic payments," she says.

And while other large merchants may be tempted to follow Wal-Mart in capturing unbanked or underbanked consumers with cash-payment options for online purchases, few are likely to do so, Hewitt suggests.

"In order to efficiently enact a strategy like this, you have to have a pretty big footprint, which Wal-Mart does," she says.

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