Walmart Becomes a Bigger Magnet for Payments Innovation

From fairly humble beginnings three years ago with the low-fee Bluebird prepaid Amex card and the Serve platform, Walmart has gotten more and more aggressive — and welcoming — with payments innovation.

Walmart's addition of MasterPass, announced Monday, as an option for online and mobile payments is the latest of several emerging payment technologies the mega-retailer has endorsed. MasterPass joins the Walmart Pay mobile wallet, the multi-retailer CurrentC wallet project, and Walmart-2-Walmart money transfers.

In the future, some of these payment options may start to blend together, such as Walmart Pay and CurrentC, the in-development product of the Merchant Customer Exchange, a retailer consortium of which Walmart is a major backer. "We will be looking for synergies through mobile in the future,"  said Walmart spokesman Randy Hargrove.

Walmart Pay and CurrentC are complementary; Walmart Pay supports multiple card payment options, while CurrentC is focused on ACH. Adding the MasterPass digital wallet "fits into our strategy of giving customers different options," Hargrove said. But it is not the first digital wallet offered on the Walmart network, he added.

Even though Walmart has resisted PayPal as a point-of-sale option in its stores, it does accept PayPal's digital wallet for online purchases.

"We also accept signature debit, cash and checks through pay-in-store for online purchases, just adding to all of our options for customers," Hargrove said.

The Walmart-2-Walmart service, which launched in early 2014 as part of a partnership with Euronet Worldwide subsidiary Ria Money Transfer, targets a different audience. The service allows Walmart customers to send funds to each other through the retail chain's U.S. store network.

By offering its own money transfer option, Walmart created a ripple effect throughout that industry, especially for MoneyGram, which is also available through Walmart, and Western Union, which eventually lowered its prices.

Midway through 2015, Walmart landed a better contract when renewing a five-year deal with prepaid card issuer Green Dot. The contract is believed to provide Walmart with about 6% more revenue.

Both MasterCard and Walmart should benefit from the MasterPass option becoming part of the retailer's online platform, said Jaclyn Holmes, senior manager of payments insights for Auriemma Consulting Group.

"Our past research has shown that convenience and security of a digital wallet are main drivers of consumer adoption and those are two traits that MasterCard has successfully communicated as value propositions for MasterPass," Holmes said.

Auriemma has monitored mobile wallet progress, specifically Apple Pay, and found that security is a double-edged sword because "it tends to be a barrier to adoption among the non-users, but is cited as a main benefit among users," Holmes added.

"The behaviors we’ve been tracking show that once consumers start using a digital wallet, they, by and large, become very comfortable and quite savvy about the security benefits they offer," Holmes said.

Digital wallet providers still struggle to add new users, so utilizing MasterPass should facilitate a convenient transition for many consumers, Holmes added.

"However, I don’t think it’s amiss to say this is likely just the first step" for Walmart, Holmes added.

Because merchant acceptance has been one of, if not the biggest, barrier to digital wallet usage, it will be "very exciting to see how Walmart Pay" progresses for the retailer, Holmes said.

MasterCard is making "a notable step" in its ongoing strategy to first raise awareness of MasterPass and, ultimately, to increase transaction volume through the digital wallet, MasterCard spokesperson Sarah Ely said.

"Walmart is one of our largest merchants accepting MasterPass," Ely said. MasterPass is currently accepted at 250,000 merchants worldwide.

Those types of numbers stood out for Walmart.

"MasterPass is growing for MasterCard in different countries and we have a solid relationship with MasterCard, and it makes sense to add the digital wallet to our mix," Walmart's Hargrove said.

Meanwhile, Walmart has a somewhat strained relationship with Visa, which might explain why it is not accepting Visa Checkout as an online payment option.

Walmart is engaged in an ongoing $5 billion lawsuit against Visa over processing fees that it hoped to settle, and must also contend with with a separate lawsuit Visa filed against the retailer.

Walmart was among the merchants that opted out of a nationwide settlement with Visa and MasterCard over allegations of illegally fixing card-swipe fees. That settlement was lowered to $5.7 billion from an initial value of $7.25 billion.