With the national rollout of Walmart Pay complete, observers are watching to see how the newest mobile wallet stacks up against other high-profile apps like Starbucks and Apple Pay.
But what’s even more intriguing to payments industry insiders is what Walmart left on the table when designing Walmart Pay, and what those decisions could mean for retailers and bank card issuers.
Walmart U.S. senior vice president Daniel Eckert, who oversees the company’s U.S. services, dropped an important clue to the company’s future plans last year.
“We made a strategic decision to design Walmart Pay to work with almost any payment type—even allowing for the integration of other mobile wallets in the future,” he said in a blog post in December 2015.
But there are limits to Walmart's ambitions for its mobile wallet. So far there are no signs of Walmart exporting its mobile payment app to other organizations (as was once rumored to be Starbucks' plan), and its decision to deploy Walmart Pay as a feature of its existing app — rather than as a standalone app — makes it clear that Walmart Pay is meant to support the Walmart ecosystem first and foremost.
Any third-party ties would fortify this structure, rather than dilute it, notes Richard Crone, an analyst with Crone Consulting LLC. “You can see Walmart positioning and posturing to distribute or integrate their software development kit (SDK) into bank-branded wallets,” he said.
Merchants already are going this direction. Starbucks last year announced it would be integrating with Chase Pay, a mobile wallet service being developed by JPMorgan Chase & Co.
Chase Pay is designed on top of ChaseNet, a closed-loop payment system in which Chase owns both the cardholder and merchant relationships. This structure allows Chase to streamline the processing structure and cut costs for merchants.
Walmart may be pursuing a similar goal with Walmart Pay. In place of Chase's strength with merchants, Walmart is able to wield its strength with consumers.
“Walmart is big enough, in terms of payment volume, that they’ve already negotiated deals with issuers that are lower than the list rate,” said Aaron McPherson, an independent payments consultant with a long track record in payments and blockchain technology.
The best rates typically are available to merchants who accept cards directly, without going through a third-party wallet like Apple Pay, he added.
Walmart and Chase's goals are so well aligned that Chase revealed its mobile wallet had the immediate support of the Merchant Customer Exchange, a mobile wallet venture that counts Walmart as a founding member.
MCX's CurrentC wallet never made it past the pilot stage and officially shut down in May, but MCX still exists. Chase announced in June that Shell Oil (also an MCX member) will be an initial supporter of Chase Pay, starting soon at all its U.S. gasoline stations and convenience stores.
“MCX merchants are the biggest players in every merchant vertical in the country, collectively representing 100,000 stores and one-fourth of all retail sales volume in the U.S.,” Chase stated in its press release announcing the relationship.
Walmart and the banks also have a mutual rival: Apple Pay. Banks don't like to see their brands getting lost in the shuffle when a customer adds a debit or credit card as one of many options within Apple Pay, which also charges financial institutions a toll of 10 to 15 basis points for each transaction. Apple's mobile wallet also provides no incentive to choose any particular card at the point of sale.
While banks weigh their options, retailers also will be closely watching Walmart Pay to see how it evolves. Even in this regard, Walmart is showing uncharacteristic restraint.
The mega-retailer has never been shy about introducing unconventional payment systems like the Walmart-2-Walmart network or the Bluebird prepaid card. But with Walmart Pay, it is reining in its ambitions.
Like Starbucks’ wildly popular mobile payment app, Walmart Pay uses QR codes, which work with any smartphone screen or camera and don't require special access to a handset's secure element. Also like Starbucks, Walmart Pay is only usable at its own stores.
Even before adding payment feature this month, Walmart’s mobile app already had a following of 22 million regular users, meaning that Walmart Pay is already in the hands of many consumers who would not normally consider themselves to be early adopters.
Some observers predict the rate of consumer adoption and relative success of Walmart Pay could significantly influence retailers’ decisions to build their own mobile payment apps and/or invest in supporting third-party apps.
Walmart so far has opted against enabling Near Field Communication — the technology required by Apple Pay and Android Pay at the point of sale — and some other major retailers are dragging their heels on contactless payments, but that may not always be the case, noted McPherson.
“It’s early days for mobile payments, and it’s too soon to write off NFC,” McPherson said. “Retailer apps typically don’t scale outside of their own stores, whereas NFC has the potential to scale across all types of payments and environments. If anything, we’re likely to see QR code-based apps and NFC coexist, and retailers and banks will make strategic decisions about which to accommodate, based on their value propositions.”