Walmart Pay and the overcrowding of the mobile payment market


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Walmart Pay and the overcrowding of the mobile payment market
The release of Walmart Pay, Walmart’s new mobile payment service, on May 16th came as something of a shock to the retail industry. Up until then, Walmart had been working with other major retailers in the US - under the umbrella organization MCX - to create CurrentC, an alternative mobile payment service that was supposed to enable retailers to avoid credit cards fees and to have direct access to their customers’ shopping data. A number of news sources have documented the drama behind Walmart’s decision to go solo and analyzed the problems leading up to CurrentC’s apparent demise. Allen Weinberg, a partner at Glenbrook Partners, a payment strategy consulting firm based in San Francisco, CA., cautioned Tradestreaming that it's premature to mourn MCX or CurrentC, given that Walmart has not formally abandoned the initiative. Nevertheless, with MCX declaring its intention to focus on bank deals, it seems likely that many other retailers and shops will jump on the mobile payment service bandwagon by developing their own offerings. Below, we examine how the proliferation of mobile payment services could impact the entire retail industry.

The Good

As customized mobile payment systems could become the norm at various retailers, consumers are unlikely to have the patience, inclination, or even phone storage space to download each and every mobile payment app. This is an opportunity for retailers to strengthen their brands and their client bases by building on their existing forms of what Paul Kemp-Robertson, cofounder and editorial director of Contagious Communications, calls ‘branded currency’. In a highly entertaining 2013 TED Talk, Kemp-Robertson posits that
“brands literally stand or fall on their reputations. And if you think about it, reputation has now become a currency. You know, reputations are built on trust, consistency, transparency. So if you've actually decided that you trust a brand, you want a relationship, you want to engage with the brand, you're already kind of participating in lots of new forms of currency.”
When asked how mobile payment services will affect already existing forms of branded currency, Kemp-Robertson replied: "The trajectory of the mobile wallet trend is only going to get steeper as mass adoption starts to kick in," he wrote Tradestreaming via email. "The brands that will benefit the most are those who move beyond mere convenience and offer tangible rewards and utility in exchange for people’s sustained loyalty. That’s why Walmart has ring-fenced its Pay system, presumably as a way of locking customers into its retail ecosystem. In other words: ‘Stay loyal and reap some exclusive, premium perks.’"

The Bad

In order to keep their customers loyal, retailers will have to become incredibly competitive. Price comparison apps like ShopSavvy already allow consumers to scan a barcode and compare prices at retailers and stores throughout the country. Walmart itself has a Savings Catcher app, which scans customers’ receipts and makes them eligible for a gift card rebate if a local competitor has the same item advertised for less. In a scenario in which every retailer is desperate to keep customers true to it and its mobile payment platform, it seems very possible that retailers will be forced to become so competitive that they’ll start losing money on some of their sales.

The Indifferent

At present, mobile payment platforms in the US haven’t exactly taken off. According to a recent study, in the last quarter of 2015, a mere 16.6% of people tried Apple Pay after acquiring an iPhone 6/6S. The same study showed a lack of enthusiasm for the product among potential and present Apple Pay users, as 30% of people polled said forgetfulness was the reason they didn't use the mobile payment platform when they could have, while another 30% simply didn’t realize that Apple Pay was accepted at the store they were shopping. It’s possible that by incentivizing their clients through discounts and loyalty programs, retailers like Walmart will have more success motivating clients to use their mobile payments systems than Apple, Google, and Samsung are having with their ubiquitous payment platforms. Even if retailers do offer these incentives, it’s still possible that consumers will rebel against the over-saturation of the mobile payment market. Peter Cohan critiqued Apple Pay in Forbes, pinpointing what would seem to be the trouble with all mobile payment systems: they are a “solution in search of a problem … But the simple reality is that credit and debit cards are not a major consumer pain point — they generally work quickly and painlessly.”

The Different

However, Glenbrook's Weinberg suggested that there's an implicit difference between retailer mobile payment services and ubiquitous mobile payment platforms, explaining, "I consider Walmart Pay, Target Pay, and the others to be less of an open-loop payment scheme like Apple Pay and Android Pay, and more of a way to 'payment-enable' those merchants’ proprietary apps, somewhat like Starbucks has." In other words, retailers' mobile payment systems aren't 'a solution in search of a problem' but really the next stage in the evolution of proprietary apps. If that's the case, consumers would be likely to carry around apps from multiple retailers because each app would provide value above and beyond payments. As more and more retailers join the mobile payment movement, it will be interesting to see just what challenges these emerging payment systems bring, and how retailers will rise to meet these challenges. Photo credit: MikeKalasnik via VisualHunt / CC BY-SA

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