Walmart and payments: Everything you need to know

December 6, 2018 3:46 PM

Walmart is already a retail heavyweight, and it has never shied from innovative projects to change the way people pay.

Over the years it has battled not only with mega-rivals like Target and Amazon, but also with the key stakeholders of the payments industry itself. At the same time, it has worked with many of these companies as partners, giving Walmart the means to not only lower its own costs but also experiment with daring new services in the digital age.

This item is compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald and David Heun. It is regularly updated with new content. Click the links in each item to read more.

A Christmas display stands at a Walmart Inc. store in Burbank, California, U.S., on Monday, Nov. 19, 2018. To get the jump on Black Friday selling, retailers are launching Black Friday-like promotions in the weeks prior to the event since competition and price transparency are forcing retailers to grab as much share of the consumers' wallet as they can. Photographer: Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

A digital makeover for the holidays (and beyond)

Walmart isn't about to be left behind while Amazon forges ahead with its own retail innovations.

The problem Walmart faces is that its customer base includes people who are presumably less tech-savvy than Amazon's e-commerce devotees. Even when Walmart.com may provide the better experience than Walmart stores, those shoppers still come to shop in person.

To bridge the gap between customer preference and digital convenience, Walmart is providing its store employees with a new app to help customers order items from Walmart.com when they are wandering the store and can't locate a specific product.

"This is another spoke in the wheel when thinking about the technologies that Walmart has added in stores," said Walmart spokesman Ragan Dickens. "We wanted to give associates the assistance with their role and give the customer a better shopping option."

In that regard, the service is meant to last well beyond the holiday season, Dickens said.

The "Walmart.com app is offering customer options to a cash-centric customer or one without access to the Internet," he added. "It provides the option to buy something that might not be in the store at that time."

The logo for Wal-Mart Stores Inc.'s Sam's Club is displayed on a shopping bag inside one of the company's store in Zhuhai, China, on Friday, Oct. 14, 2016. Wal-Mart sees big potential in China: its Sams Club in Shenzhen, a fast-growing urban center in the southeast, is the chain's best-performing outlet globally. Photographer: Qilai Shen/Bloomberg

Qilai Shen/Bloomberg

A retail tech hub

Called Sam's Club Now, the store builds off of Walmart's two-year-old Scan&Go app to reimagine how staff and shoppers engage with each other throughout an entire session, rather than seeking to simply pare down the point of sale experience. Scan&Go has provided a head start, with 90 percent of initial users using the app again on their next grip and a 40 percent increase in overall use this year, the retailer reports.

Sam's Club is positioning the store as a "lab" to incubate, test and refine technology. Walmart did not return a request for comment on the store's timing, and whether it would be incorporated into the broader Walmart chain.

Walmart's rivalry with Amazon is playing out on a number of fronts, and Scan&Go technology is seen as a key counter technology to Amazon Go for incumbent brick-and-mortar retailers. The technology is seen as away to free up space within the store by redeploying staff.

At the new Sam's Club in Dallas, scan and go will combine with artificial intelligence and purchase data to autofill a member's shopping list, which can be updated as a consumer moves through the store. Sam's Club will also use a combination of voice search and navigation tools to determine the shopper's best route through the 32,000-square-foot store, which is about a quarter of the size of a normal Sam's Club location — but still larger than most current cashierless stores.

Augmented reality will provide information on sourcing and uses for objects (or turn shoppers' carts into virtual pirate ships or rockets). Other tests include electronic shelf labels that will instantly update prices, and 700 cameras that will inform store layout changes.

An employee double checks the contents of a customer order before sealing the package for shipment at the Jet.com Inc. fulfillment center on Cyber Monday in Kansas City, Kansas, U.S., on Monday, Nov. 30, 2015. Online sales on Cyber Monday may rise at least 18 percent from a year earlier, slower growth than during the holiday weekend, as consumers start their Internet shopping earlier, according to forecasts by International Business Machines Corp. Photographer: Daniel Acker/Bloomberg

Daniel Acker/Bloomberg

A digital door into a physical market

Jet, which Walmart acquired for $3.3 billion two years ago, has added a range of improvements including voice-controlled shopping lists, faster delivery turnarounds and customized delivery options including same-day grocery delivery in Manhattan. Walmart's move coincides with myriad Amazon projects that enable faster and more accessible home delivery.

Jet users may build shopping lists via iOS’s Siri and shoppers in New York may specify a three-hour delivery window for same-day and next-day orders. The faster arrivals are powered by Parcel, the delivery service Walmart purchased last year.

The Jet makeover features a local spin for each major market. In New York, for example, the site touts local brands Bedford’s Cheese Shop and Just Bagels, with local and craft beers also available for same-day and next-day delivery.

In October, a marketing deal with Nike produced “curated” Nike and Converse shoes for Jet customers. Jet’s use of iOS for voice ordering is consistent with its support of Apple Pay, in contrast with parent Walmart, which continues to shun Apple Pay.

The Jet.com makeover follows a Walmart pilot for delivery powered by self-driving cars in Chandler, Ariz. for groceries, which launched in July.

Pedestrians walk past PayPal Holdings Inc. signage outside the company's headquarters in San Jose, California, U.S., on Tuesday, Jan. 24, 2017. PayPal Holdings Inc. is scheduled to release earnings figures on January 26. Photographer: David Paul Morris/Bloomberg

David Paul Morris/Bloomberg

Being selective about payment partnerships

Walmart's PayPal cash service is a previously unheard of mobile wallet collaboration for the retail chain, but a mass of underbanked consumers and a path to future innovation provide a distinct allure.

PayPal and Walmart are offering a cash-in and cash-out service from PayPal accounts within Walmart stores, with a $3 fee per service. PayPal's Mastercard customers will have the same capabilities within Walmart.

"We have found that the underbanked and unbanked is really the new middle class," PayPal president and CEO Dan Schulman said during a Facebook Live presentation in October. "That many people not having access to the basic consumer financial transaction assets had to be addressed."

It's the first time Walmart agreed to accept a third-party mobile wallet. Walmart, one of the founders of the defunct Merchant Customer Exchange that was created to counter the third party wallets, has accepted only Walmart Pay, rejecting other apps such as Apple Pay and Google Pay.

In July, Walmart also partnered with American Express, enabling its customers to earn and burn Amex’s Membership Rewards points for e-commerce purchases on Walmart.com.

An employee wears a yellow Wal-Mart logo superhero cape at a Wal-Mart Stores Inc. location in Burbank, California, U.S., on Tuesday, Aug. 8, 2017. Wal-Mart Stores is scheduled to release earnings figures on August 17. Photographer: Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

Walmart takes on the world

Building on a service called Walmart2Walmart, which allowed transfers only among U.S. Walmart stores, the new international service — called Walmart2World — launched in Walmart's 4,700 U.S. stores through a partnership with MoneyGram International.

The service gives Walmart a chance to cash in on the massive market for cross-border payments, fueled by an increasingly digital economy and global investments in using blockchain to reduce costs of international money movement.

"Walmart likes to be a 'bank' because there is a lot of room for profitability and to provide better service in that sector," said Larry Berlin, vice president with Chicago-based First Analysis Securities. "By offering these types of financial services, they are also looking for foot traffic and more sales in their stores."

It is becoming more common for a Walmart shoppers to go to the financial services section of a store and feel pretty much like they are in a bank branch.

"You'll see the MoneyGram services, you'll see the various prepaid card offerings, you'll see maybe a bank branch ATM and pitches for mobile payment applications, things like that," Berlin said. "They tried to be a bank and got turned down, and they have worked hard to get around that."

Walmart's prized prepaid card: Bluebird

The Bluebird prepaid card is a staple of Walmart's financial offerings, and the retailer has made sure to keep its features up to date.

Launched in October 2012 in partnership with American Express, the card carries lower fees than many of its competitors – a business model that Amex said is feasible in part because Amex owns and operates its own payment network, which means that its operating expenses are largely fixed.

Shortly after the card's launch, Amex declared that approximately 80% of Bluebird enrollees were new to Amex, and 45% of purchasers are under age 35 — and that most purchases were taking place outside of Walmart stores, indicating that it held appeal to more than just Walmart's most loyal shoppers.

But Walmart's brand is still an integral part of the Bluebird card, as evidenced by the product's most recent updates. Last year, Walmart debuted the Bluebird2Walmart money transfer service, allowing Bluebird account holders to use an app to digitally send money for cash pickup at Walmart store locations. Pricing is consistent with the Walmart2Walmart transfer service, a domestic U.S. transfer service that allows customers to send funds for recipients to pick up at other Walmart stores.

Visa Inc. credit and debit cards are arranged for a photograph in Washington, D.C., U.S., on Wednesday, Jan. 29, 2014. Visa Inc. is expected to release earnings data on Jan. 30. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Picking big fights with big brands

Not every retailer can make good on a threat to outright ban one of the world's largest card networks. But that's just what Walmart's Canadian operation did in 2016.

On the surface, Walmart Canada's decision to stop accepting Visa credit cards in protest of its fees comes across as simply another conflict between the giant retailer and the card network. But it was also setting the stage for something bigger.

Walmart was also deeply engaged in a legal dispute against Visa over debit routing, and had also shut the network's credit cards out of its transactions at its Sam's Club warehouse stores. The card network was put on the defensive after it reportedly agreed to rock-bottom pricing to win a contract at Costco away from rival American Express. Visa's then-CEO Charlie Scharf repeatedly called that situation "unique," and noted that it guaranteed that Visa would be the only card brand accepted in those stores.

And both companies had less at stake in this dispute. Taking into account that Interac drives the majority of debit transactions in Canada, it is likely that even more debit transactions take place at Walmart Canada stores than in the U.S.

Michael Cook, Walmart's vice president and treasurer, stated publicly at a 2011 SourceMedia conference that debit and cash transactions represented the majority of transactions in U.S. Walmart stores, while credit and debit transactions dominated Sam's Clubs transactions.

The dispute resolved itself quietly in early 2017, with neither company disclosing the details of their cease-fire. But as a result, Walmart once again opened its doors — and cash registers — to Visa throughout Canada.

The CurrentC application (app) is demonstrated on an Apple Inc. iPhone 5s for this arranged photograph in Washington, D.C., U.S., on Thursday, Oct. 30, 2014. CurrentC, the retailer-backed mobile-payment system touted as an alternative to Apple Inc.'s platform, was hacked during a test of the technology, resulting in some e-mail addresses being stolen. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

An alliance of sworn enemies

Back in the earliest days of the mobile wallet market, before the announcement of Apple Pay and the rival "Pay" brands, Walmart concluded that if it is not able to dictate the direction of this market, it would not reap the rewards.

It predicted correctly that if banks or technology companies controlled the customer's mobile wallet app, they would gain the most valuable data and insights into customer spending. Indeed, when Apple Pay finally did launch in 2014, a key selling point was tokenization — a process that protected card data by masking much of it from the merchant.

Walmart headed this off by playing a key role in developing the Merchant Customer Exchange, a nationwide alliance of retailers, with direct competitors like Target and Best Buy, in 2013. These companies not only agreed to develop their own mobile wallet to share across their brands, but to do so exclusively, blocking rival wallets like Apple Pay until their exclusivity agreements ran out.

Unfortunately for Walmart, the MCX wallet, called CurrentC, languished in pilot while Apple Pay, Android Pay and Samsung Pay built relationships with merchants on their own. As the CurrentC exclusivity agreements expired, most MCX participants quickly jumped on board with other brands — perhaps the biggest nail in MCX's coffin was Best Buy's decision to not only accept Apple Pay, but to allow Apple to announce the win on its own earnings call. Up to that point, Best Buy had been a staunch opponent of any kind of NFC-based mobile wallet.

Cars sit parked outside a Wal-Mart Express store in Richfield, North Carolina, U.S., on Friday, Jan. 15, 2016. Wan-Mart Stores Inc. plans to close 269 store, including its experimental small-format Express outlets, in a much to streamline the chain that will eliminate 16,000 jobs. Photographer: Jason E. Miczek/Bloomberg

Jason E. Miczek/Bloomberg

A Seinfeld-esque scheme to battle Amazon

It's no secret that Amazon's business model is a major threat to Walmart, but their battle has heightened in the past year as Amazon has made aggressive efforts to take over grocery sales. Even before Amazon spent $13.7 billion to buy Whole Foods, it was building out a network for selling groceries online for pickup or delivery.

Last year, Walmart began testing a delivery program that leverages its store staff as delivery drivers in a decidedly manual response to the digital threat of Amazon.com. And it just might work.

Conceptually this initiative may be a stroke of genius, not unlike the Seinfeld “Bottle Deposit” episode where the economics of bottle redemption out of state are resolved by leveraging a character's mail truck. But, as with the Seinfeld episode, the devil is in the details — converting store clerks to delivery drivers may be a can of worms that Walmart doesn’t want to open, creating staffing and liability issues.

But, in the face of competitive pressures — notably from Amazon, which intends to become a ‘Top 5’ U.S. grocery delivery company by 2025 — Walmart may have no choice.

“Not only can this cut shipping costs and get packages to their final destinations faster and more efficiently, it creates a special win-win-win for customers, associates and the business,” wrote Marc Lore, president and CEO of Walmart U.S. eCommerce, in an official Walmart blog post.

Walmart associates are fully in control of the experience and participation is optional. If they choose to opt in, associates choose how many packages they can deliver, the size and weight limits of those packages and which days they’re able to make deliveries after work.

The ability for Walmart employees to earn a bit more money for doing something that they would be doing anyway — driving home — may be appealing. However, using employees for a task that they were not hired for could be fraught with liability issues.

Pedestrians pass in front of a JPMorgan Chase & Co. bank branch in Miami, Florida, U.S., on on Thursday, Jan. 5, 2017. JPMorgan Chase & Co. is scheduled to release earnings figures on January 13. Photographer Scott McIntyre/Bloomberg

Scott McIntyre/Bloomberg

Chase gives Walmart fresh ammo for its card-fee fight

In 2016, Walmart announced a pact with JPMorgan Chase that was anything but routine.

The processing deal, which expands on the companies' earlier relationship for handling Walmart’s e-commerce transactions, diverts Chase card payments at more than 5,000 Walmart and Sam’s Club stores through ChaseNet, a closed-loop system designed to slash costs for merchants.

Chase accomplishes this by acting as the acquirer, network and issuer for transactions where both the cardholder and the merchant are Chase clients. And from the perspective of Walmart, this deal hands it a long-desired holy grail: less expensive Visa transactions.

“We will still have a relationship with Visa for non-Chase transactions,” but the deal with Chase "will bring much-needed competition to the payments markets," said Randy Hargrove, a Walmart spokesman, at the time of the announcement.

Walmart has been a scathing critic of Visa's fees and routing structure, repeatedly confronting the card network in court and going so far as to ban Visa cards at certain locations in Canada.

The deal with Chase gives Walmart significant new leverage in how it handles Visa transactions. “Walmart will have the ability to selectively route transactions based on the performance of the payment providers,” Hargrove said.

ChaseNet has its roots in a 10-year contract that Visa entered with Chase in 2013 to create a customized processing and end-to-end payments platform. ChaseNet has since become the foundation of Chase Pay, the bank's mobile wallet.

Walmart is inviting other issuers to consider similar arrangements, Hargrove hinted. “We believe other issuers would benefit from the efficiencies created by connecting directly with Walmart," he said.

A customer carries a basket while shopping for school supplies at a Wal-Mart Stores Inc. location in Burbank, California, U.S., on Tuesday, Aug. 8, 2017. Wal-Mart Stores is scheduled to release earnings figures on August 17. Photographer: Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

Walmart Pay picks up where MCX left off

On the surface, Walmart Pay — a mobile wallet accessed through Walmart's mobile app — is everything Walmart envisioned the MCX CurrentC wallet would be.

But it also shows what's possible when the company doesn't have to worry about pleasing every other retailer in the U.S.

Walmart Pay came about in December 2015 — before the MCX/CurrentC project was suspended — in part because the company "realigned our technology teams because we want more speed and more customer-centric and cost-efficient innovations like this one," president and CEO Doug McMillon said in a 2016 earnings call.

One goal of Walmart Pay was to drive more usage of the Walmart mobile app by the brand's in-store shoppers.

Though Walmart said at the time that it would continue to support MCX, the mega-retailer's decision to launch its own mobile wallet brand was probably the final nail in MCX's coffin. The multi-retailer venture sold off its technology to JPMorgan Chase in early 2017.

Since Walmart Pay's launch, Walmart has nurtured the product, adding features such as the ability to immediately use a virtual version of Walmart’s store-brand credit card or its Walmart Mastercard from within the app upon approval.

Packages move along a conveyor belt inside a Wal-Mart Stores Inc. fulfillment center in Bethlehem, Pennsylvania, U.S., on Wednesday, March 29, 2017. Wal-Mart Stores Inc. acquired e-commerce startup Jet.com for $3.3 billion in cash and stock. Jet.com Founder and his management team were put in charge of Wal-Mart's entire domestic e-commerce operation, overseeing more than 15,000 employees in Silicon Valley, Boston, Omaha, and its home office in Arkansas. Photographer: Michael Nagle/Bloomberg

Michael Nagle/Bloomberg

Bringing retail into the home

Despite the widespread concern over the creepiness of Amazon Key — a service that lets couriers unlock the doors to customers' homes to deliver Amazon packages — Walmart already has its own version in the works.

While Amazon promises that couriers will only leave packages inside the door before locking up, Walmart is working with Deliv to offer a service that pushes boundaries even further. For example, if a customer orders groceries from Walmart, the courier could be asked to put the groceries away once inside the customer's home.

The service, announced in November 2017, is testing in the San Jose area for deliveries scheduled between 8 a.m. and 8 p.m.

Robot Holding Shopping Cart With Cardboard Boxes On Turquoise Background

Andrey Popov/Andrey Popov - stock.adobe.com

Buy, Robot

Another way Walmart is one-upping Amazon is through its use of robots. While Amazon built its cashierless Go store to hide technology in the walls and ceilings, Walmart is content to let its machines roam its aisles.

In October 2017, Walmart expanded its use of shelf-scanning robots, which check stock levels, pricing and misplaced items, creating one of the largest deployments of shelf-scanning robots to date.

The robots, manufactured by Bossa Nova robotics, use 3D imaging to move around obstacles in the aisles, and can also make notes to return to an aisle later if it's completely blocked.

The robots aren't designed to replace human staff, and humans will continue to stock shelves, since — among other reasons — the robots have difficulty grabbing objects.