Walmart has entered the mobile payments industry, announcing in December that it was introducing Walmart Pay, an upgrade to Walmart’s existing app that will allow in-store shoppers to pay with their smartphones at checkout.
Walmart says its proprietary technology is designed to work on any Apple iOS or Android device and can be linked to any major credit, debit, pre-paid, or Walmart gift card. The megastore will test the app in a few select locations this month before rolling it out to every U.S. Walmart location by July 2016.
Walmart’s decision affects the entire retail industry, including the Merchant Customer Exchange (MCX) consortium, which is pursuing a similar initiative; Walmart’s retail rivals; and Apple and Google, early pioneers in the mobile payments field. Let’s take a look at those ramifications.
The MCX Consortium. A group of 40 merchants — Walmart, Target, Lowe’s, Best Buy, Kohl’s, CVS, and others — has been developing CurrentC, a mobile payments option intended to reduce or eliminate the credit card processing fees that merchants pay. Creating a payment solution that worked at numerous retailers, restaurants, and other outlets would optimize consumer acceptance and usage. Progress has been slow, though, so Walmart decided to replicate Starbucks and create its own in-store payment system.
Walmart says that it “remains committed” to the MCX initiative, believing that CurrentC and Walmart Pay can co-exist, sentiments shared by an MCX spokesperson. However, Walmart’s decision to fly solo will likely sow doubts among its MCX partners. If other retailers follow its lead and develop their own in-store apps, the entire effort could be scuttled.
Walmart’s Rivals. Increasing customer satisfaction is a proven way to increase customer loyalty, and Walmart Pay is intended to make in-store transactions faster and more convenient, two features in high demand among today’s shoppers. People who download the app will also want to take advantage of it, and once engaged, they’ll likely use it to shop and place more orders at Walmart.com, even when they’re browsing other sites.
Apple and Google. As the first to market with mobile payments systems, Apple and Google faced little competition. Walmart Pay raises the stakes in an industry expected to generate over $27 billion in payment sales in 2016, triple this year’s total, while growing to 37.5 million users.
Apple Pay and Android Pay, which use Near Field Communication (NFC) technology, have been slow to gain traction. Walmart Pay, which uses Quick Response (QR) codes (as does CurrentC), could share its proprietary technology with its MCX partners or strike out on its own.
Consumers will be the final arbiters, of course. Walmart Pay, which requires users to open the app at checkout and scan a code on the register, is “clunkier” than its NFC rivals. By integrating it into its existing app, though, Walmart is making it available to 22 million active users as soon as it’s live. That sort of early boost would be the envy of any start-up.
Tom Caparaso is CEO of Clarus Commerce.
