Competition in the mobile payment space is heating up once again. Retail giant Wal-Mart (NYSE: WMT) announced late last week that it is launching its own mobile payment system, the final chapter in its defiant rejection of payment systems like Apple’s (NASDAQ: AAPL) Apple Pay.
Walmart Pay has already launched in certain stores located near its Bentonville, Ark. headquarters, with plans to launch the system at the rest of its store locations after the holidays. The company has said that it will introduce Walmart Pay in all of its more than 4,500 U.S. stores by the end of the first quarter of 2016.
Wal-Mart’s decision to launch its own payment service is, without question, a smart move.
Consider that roughly 22 million customers use Wal-Mart’s mobile app each month, and that nearly half of the orders placed between Thanksgiving and Cyber Monday were placed on a mobile device.
By offering its own payment service integrated right into the app, Wal-Mart will be able to provide what it calls “a seamless shopping experience.” The company recently added a feature that allows customers who ordered online for in-store pickup to “check in” once they arrive in the parking lot so the store can send their items out to them.
There are some very good reasons why Wal-Mart chose to create its own payment system.
First, Apple Pay only works on Apple devices. Android Pay from Alphabet (NASDAQ: GOOGL) and Samsung Pay from Samsung only work on Android devices. Wal-Mart’s new payment system will work on any mobile device – one of the key selling points that Wal-Mart is focusing on.
The Coffee Connection
In this sense, Wal-Mart’s new mobile payment system takes a page out of Starbucks’ (NASDAQ: SBUX) playbook.
Starbucks, the $90 billion titan of coffee, has achieved tremendous success with its own mobile app and payment system. Payments originating through the Starbucks app now account for roughly 20% of the 9 million weekly transactions, a staggering number.
Like the Starbucks app, Walmart Pay does not employ the use of NFC – near field communication – to facilitate the transaction. This is the technology used by Apple Pay, Android Pay and Samsung Pay that enables tap-to-pay transactions. Whether or not one option is more convenient than the other is likely a matter of personal preference. Certainly opting against NFC in Walmart Pay will save Wal-Mart from having to upgrade its tens of thousands of point-of-sale terminals.
There is one key difference between Starbucks’ app and Walmart Pay.
When customers pay through the Starbucks system, a barcode appears on their phone that is scanned by the Starbucks cashier or a scanner installed at the register. Walmart Pay uses a QR code – or “quick response” code – which is essentially a 3D bar code. When customers pay through Walmart Pay, a code appears somewhere at the point of sale and they scan it using their Wal-Mart app.
Walmart Pay allows consumers to pay with store gift cards, debit cards and credit cards, including Wal-Mart’s own credit card that it is heavily promoting this holiday season.
An Attack on Amazon
More than anything, Walmart Pay feels like the $190 billion elephant in the retail room playing catch-up with competitors like Amazon.com (NASDAQ: AMZN) that continue to roll out new features and programs that cross the divide between e-commerce and brick-and-mortar commerce.
Interestingly, Walmart Pay functions nearly identically to CurrentC, a mobile payment system being developed by the Merchant Customer Exchange, or MCX.
MCX is a cooperative brick-and-mortar retail effort to fend off the massive threat to traditional retail posed by tech companies. CurrentC is meant to be its alternative to systems like Apple Pay.
Indeed, major retailers like Wal-Mart have supported the MCX, and CurrentC is currently being tested in some Wal-Mart locations. With the rollout of Walmart Pay, I’m starting to question whether Wal-Mart will follow through with its plan to implement CurrentC at all of its stores.
Walmart Pay is a big deal for Wal-Mart, but I don’t expect it to have a major impact on the mobile payment industry.
Consider that Wal-Mart didn’t allow payment systems like Apple Pay in the first place, so it’s not like these systems are losing ground to Walmart Pay.
Meanwhile, Walmart Pay won’t work anywhere besides at Wal-Mart stores.
That said, with the potential for integration with Wal-Mart’s branded credit card, a loyalty program, same-day pickup and smart marketing, Walmart Pay could be just the catalyst needed to jump-start sales and fend off Amazon.
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