Walgreens' latest banking services take pages from the playbooks of digitally savvy retailers like Starbucks and Amazon — as well as neobanks.
At the heart of Walgreens' new bank offerings is its myWalgreens reward app. This approach has echoes of Starbucks and Amazon. The coffee chain became one of the few early success stories in mobile payments by building the capability on top of its popular rewards card. And Amazon offers a wide range of payment cards that don't scrimp on rewards — users of its secured card earn
Users of Walgreens' Scarlet digital bank account, which provides a Mastercard debit card from MetaBank and InComm Payments, get a $10 signup bonus through the end of this month and up to 5% Walgreens Cash on debit card purchases. With the
If these rewards are compelling enough, consumers could see Walgreens as a viable alternative to a traditional bank.
"Neo and challenger banks have been playing in this market for quite some time, and I think the question for Walgreens is whether getting cash rewards is enough to drive usage," said Sarah Grotta, director of debit and alternative products advisory at Mercator Advisory Group.
The retail giant Walmart also relies on rewards to drive interest in some of its most popular
But Walmart has no storewide loyalty program, nor do all of its financial services rewards have the same redemption process through its website or app.
Walgreens' closest rival, CVS, has a robust loyalty program integrated with its mobile app, but currently it has no financial services products.
It has taken years for Walgreens to reach the point where it can seamlessly connect online and in-store transactions with purchase data through a modernized app, which is used by 100 million customers.
Walgreens was one of the first merchants to sign on with Google Wallet, becoming one of a handful of U.S. merchants to commit to Near Field Communications-based contactless payments as early as 2011.
Though Google sidelined its original mobile wallet years ago in favor of the modern Google Pay, Walgreens continued contactless payment support in its Walgreens and Duane Reade stores. To extend contactless payment support within its mobile app, Walgreens last fall ditched its Balance Rewards loyalty program and introduced myWalgreens.
Adding a digital bank account was a natural next step, said Maria Smith, Walgreens’ vice president of payments and financial services, in an emailed statement.
“Americans have trusted Walgreens with their health and well-being for generations, and we believe that Scarlet provides a great value to those looking for a new banking solution from a trusted community partner,” Smith said.
In addition to pushing Scarlet on its website and mobile app, Deerfield, Illinois-based Walgreens is selling the Scarlet bank account and Mastercard debit card at its stores for $1.95. Those who sign up online or via Walgreens’ app get the card by mail.
The Scarlet bank account offers users two-day-early direct deposit, bill pay services and account-to-account transfers to other Scarlet customers. Each account also has tools enabling users to establish goals and set money aside.
ATM withdrawals through Scarlet are free at Walgreens, and users may load cash to the account free at the register using a bar code displayed within the mobile app.
One drawback to Walgreens' financial services strategy could be lack of in-store support for the new products. Walgreens is offering Scarlet via a banking-as-a-service model increasingly popular with branchless neobanks with customer service provided primarily through digital channels, which observers say is wise.
“Could workers in Walgreens be able to answer financial questions? That would be tough to accomplish,” Grotta said.
Walgreens may not be finished building out its financial services. When the company announced plans to enter the payments technology sphere early this year, it mentioned the possibility of offering point-of-sale financing, including installment loans. Walgreens has offered no updates on those plans.
One analyst says Walgreens will need time to explore the possibilities.
"The question is whether Walgreens is attracting only near-prime customers or if they can draw younger-demographic consumers who have not yet established a primary bank," said Wei Ke, managing partner at the New York-based marketing consulting firm Simon Kucher & Partners.
