When Walmart switched on Walmart Pay this week at 600 stores in two states, it marked the beginning of a new era, when merchants finally take the reins in mobile payments — and, by extension, the future of digital commerce.
At first glance, the Bentonville, Ark.-based retailer's mobile payments approach looks decidedly low-tech, asking consumers to scan QR codes rather than duplicate the wireless magic of Apple Pay or Android Pay. It also sticks to familiar funding methods such as credit and debit cards and seemingly does nothing that hasn't been tried before.
But Walmart’s strategy is anything but simple, and Walmart Pay provides a the missing piece that the retailer's mobile commerce strategy has long needed, analysts say. The arrival of the Walmart wallet kicks off what will likely be a watershed year in the way merchants exploit payments technology to gain control over the emerging omnichannel shopping experience.
“Walmart is the first retailer to connect the entire shopping experience through the mobile device in a single app, from selecting items to checkout and payment, and it points to a retail revolution,” said Richard Crone, a principal with Crone Consulting LLC, who specializes in payments’ role in the omnichannel.
What’s particularly significant about Walmart Pay is its role within an app delivering broader omnichannel capabilities Walmart has been working on for years, where it’s gained a following of about 22 million regular users, Crone said.
Within Walmart, the unveiling of Walmart Pay has been long in the works and is a key strategy for the company’s expanding omnichannel plans, Kara Kazazean, Walmart’s director of credit and debit acceptance, said earlier this year when profiled for PaymentsSource’s Most Influential Women of Payments.
Walmart Pay is live in Texas and Arkansas today with a planned nationwide rollout by the end of June. The mobile payment system will no doubt be a vital part of Walmart's recently launched test of two-day shipping services to compete with Amazon, observers say.
“Walmart for several years in Silicon Valley has been building the parts to enhance the shopping experience within its app, but adding Walmart Pay pulls all the pieces together,” Crone said.
Walmart’s app enables users to create shopping lists for in-store or online purchases, and with Bluetooth low-energy beacon technology built into most of its stores, shoppers can use the app to navigate directly to items on store shelves. Customers can refill prescriptions from the app, which also stores gift cards and receipts.
Walmart this week also integrated its existing Savings Catcher feature into Walmart Pay, enabling consumers to instantly submit receipts to compare with local advertised deals on product they’ve purchased. If a local competitor offers a better deal, Walmart's app returns the difference a few days later in cash to Walmart Pay, where it’s stored in an eGift card that can be used for future purchases.
Interestingly, Walmart Pay does not steer consumers toward a particular payment card, but that may not be the case forever, some analysts predict.
Walmart rose to become the nation’s largest retailer by applying its legendary low-cost operating model to everything from its no-frills store décor to squeezing volume discounts from suppliers, and its maneuvers with the payments industry are no exception.
A lightning rod in the banking and payments industries over the last decade, Walmart is continually needling the card networks as a lead player in court and at the negotiation table to drive down the cost of accepting payments, particularly credit and debit card interchange.
One of the core tenets of the retailer-led Merchant Customer Exchange consortium, of which Walmart is a major backer, was using mobile technology as a vehicle to support lower-cost payments approaches such as ACH.
However, this week MCX put production of its CurrentC wallet on hold and laid off 30 employees following a prolonged pilot in Columbus, Ohio. CurrentC still has several vital building blocks in place that may benefit Walmart, such as its use of a cheaper ACH funding option. CurrentC is also working with Chase Pay, a mobile wallet from JPMorgan Chase & Co. built on its closed-loop ChaseNet system, which provides lower fees to Chase merchants. Walmart is a participant in the bank's pilot.
“Clearly there is significant opportunity for Walmart to improve the payment interaction with consumers, but it’s likely they took the current approach with Walmart Pay because it leverages existing point of sale payments capabilities,” said Tim Sloane, vice president of payments innovation with Mercator Advisory Group.
Sloane predicts Walmart will eventually add additional, lower-cost payments options to Walmart Pay.
The current process to register and pay with Walmart Pay requires several more steps than some other mobile payment methods, such as the NFC-based Apple Pay, Android Pay and Samsung Pay wallets.
Registering for Walmart Pay within the Walmart app requires setting up a four-digit PIN to open the app or using a fingerprint for access; users also must designate a default payment method upon enrollment.
To pay at the checkout, users open the app, select Walmart Pay, activate the camera and scan the QR code displayed on the retailer's PIN pad. Consumers may scan the code at any time during the checkout process, and payment is completed when the cashier closes the sale. The app stores the shopper's recent receipts.
Will those steps be a deterrent to consumers, compared with the nearly instant NFC approach that may not even require opening the mobile payment app?
It all depends on whether Walmart Pay's features outweigh the friction of activating it, Crone said.
“Customers that are already using the Walmart app will see Walmart Pay as yet another useful feature,” Crone said. “Through its app, Walmart already knows when the shopper enters the store, what she’s going to buy before she gets there, and shows her how much money she’s saved by shopping there. This is just the beginning of where Walmart is going, and now mobile payments is part of it."