Walmart Pay: Not an atomic bomb, but a trojan horse (or a forceful nudge)

The brands Walmart and Apple are rarely mentioned in the same breath – although, that circumstance is probably a result of typecasting more than consumer behavior. It may also change, at least among payments geeks, now that Walmart has unveiled its own entrant in the mobile wallet wars. Thanks to its sheer scale and reach, any move made by Walmart deserves attention. Still, dubbing this “an atomic bomb dropped on Apple Pay” (as this Forbes article did) seems a pretty big overstatement.

Walmart has wisely focused on an integrated consumer experience, converging in-store and online checkout processes, enabling coupon and gift card redemption and split tenders, and building the payment functionality into its existing widely distributed mobile app. Other details remain in short supply, such as the recent Chase Pay announcement. Walmart Pay won’t be widely available until mid-2016, but on first blush Walmart’s approach has far more in common with Starbucks’ app than with Apple Pay.

Like Starbucks, Walmart’s entrant is intended for use solely at the company’s own retail outlets. Again this could prove quite savvy, as it confers far more control over the user experience. It may also be the “secret sauce” that explains why Starbucks is the only player to have achieved scale in mobile payments. But it’s a different business opportunity than the one Apple, Samsung et al. are pursuing.

The Starbucks analogy only carries so far, however. Walmart likes to tout that it comprises nearly 10 percent of all U.S. retail sales, and that 140 million consumers visit its stores each week. These are very impressive numbers, to be sure, but they represent a vastly different shopping experience than Starbucks. Many of whose patrons who visit daily (if not more often) have a standard/repeatable order – and place a premium on the fast in-and-out aspect of their interaction.

Another widely reported aspect of the Walmart announcement is the implication that it reflects a repudiation of the MCX/CurrentC strategy. Representatives of Walmart and the MCX retail consortium have already issued follow-up quotes in an effort to squelch this impression. You’d expect these types of statements regardless of true intent, but I have a hard time with the “Walmart undercutting MCX” storyline for several reasons:

First, in its still ongoing exploration of what it wants to be, MCX has at various times publicly stated that its model could involve a consortium of members each issuing their own wallet apps leveraging a common backbone. It’s possible that’s precisely what Walmart Pay has done. Technical details haven’t been shared, but it’s clear that Walmart Pay functionality is triggered by QR codes, the same path CurrentC chose. (It’s also similar to Starbucks’ approach. Although, they’ll take pains to point out their app actually uses “enhanced bar codes.”)

And if Walmart’s move does prove to be a knockout blow for MCX, I’d hardly call it a sucker punch. The consortium has already incurred more than its share of self-inflicted damage. Don’t forget it launched long before Apple Pay, yet has not managed to proceed beyond the pilot stage amid numerous management changes and strategy shifts.

With its announced Chase Pay partnership, MCX already seemed to have painted itself into a corner in terms of a standalone market solution but could declare partial victory for the reach the alliance brought its members. If anything, Walmart’s could become more the final push off the cliff for MCX.

Finally, bear in mind the initial impetus for Walmart’s championing of MCX, which came from the Treasury group after all, was a fervent desire to reduce acceptance cost. In fact, some believed the consortium was largely a “stalking horse” built to gain leverage with the card networks in interchange negotiations. MCX hasn’t delivered measurable results on that front, and one could argue it’s where Walmart lost patience and decided to forge this new path.

Maybe its shopping experience doesn’t map perfectly to Starbucks’, but with a reported 22 million users of its mobile app, Walmart can build usage of its payment feature with an accept-all-tenders approach (CurrentC has spent most of its existence back-burnering card acceptance in hopes of jumping straight to the ACH endgame), then gradually offering incentives to steer consumers to low-cost-routing (see PayPal for a best practice on this front).

None of this is going to shift the payments world overnight. But it sure is fun to watch the chess pieces move and to strategize on how credit unions can best capitalize on these changing dynamics and allegiances.

John Best

John Best

Financial technology service expert John Best crushes the reiterated maxim “thinking outside the box” to tiny particles, leveraging his lofty, yet proven, financial technology “innovativeness” for credit unions nationwide. Recently ... Web: Details