What Walmart Pay Risks With National Move

Last week brought a major milestone for payments junkes nationwide. As of Wednesday (July 6), Walmart Pay is officially up and running in the over 4,600 stores that make up Walmart’s inland empire.

“Walmart Pay is just the beginning,” SVP of Walmart Services Daniel Eckert said on a conference call. “We’re building deeper relationships with our customers across our ecosystem and are looking forward to delivering new tools like Walmart Pay that allow them to use the Walmart app as their remote control for a faster, more convenient shopping experience.”

The early buzz – care of Walmart mostly at this point – has been largely positive. Favored stats include the  4 out of 5 users reporting they would recommend it to others or the 88 percent of transactions processed through repeat users.

So pass out the party hats, Walmart just won mobile wallets?

Well one, never pass out the party hats on day one, it never goes well.  But even in the early victory lap stage – some of the experts have come to call with less than chipper outlook on the prognosis for Walmart Pay. It might work, they say, and the people who use it really like it.  But will enough people use it and like it to make it an important player.

Well, that’s where the experts have their doubts.

Store Specific Payments Are So 20th Century

“A store-specific ‘pay’ system is as dead-end as the store-specific credit card,” Herb Sorensen, scientific advisor at Kantar Retail, told RetailWire. “Not that it cannot generate significant activity pending wider deployment of things like Apple Pay, etc. The problem is that shoppers do NOT want to carry around cards (or tags) for all the stores where they shop. Having several cards for different personal/business purposes is a big enough hassle. Having different cards for different retailers makes no sense.”

The problem according to Sorenson and others is that Walmart – by locking out their competition like Apple Pay – has basically created something outmoded – a payment method that is only usable in one place.  And that, he notes, is just not what consumers are wanting these days.

Ryan Mathews, founder and CEO of Black Monk Consulting, agreed that Walmart Pay’s exclusivity in Walmart stores may have been all well and good among loyal shoppers for whom the downloading and integrating of the app into their shopping behaviors is as natural as anything.

However, for Eckert to tout the convenience that Walmart Pay adds to the consumer experience, outsider consumers may be just as likely to see their options limited by the policy.

“Ever been to a Nordstrom when a customer is told they can’t charge their purchases on their Visa or MasterCard?” Mathews told RetailWire. “It isn’t pretty.”

It’s this question of friction that Walmart sees itself once again confronted with now that its payment method of choice has hit the wide retail world. Other mobile wallets have had head starts of months and even years longer spent raising familiarity among consumers – and at many more locations than Walmart stores alone.

“Table stakes when it comes to payment in these mobile apps is that the experience has to be easier,” Brendan Miller, principal analyst at Forrester Research, told Fortune. “If there is any more friction in the payments experience, you’re going to have a hard time.”

But has Walmart really added friction by limiting its in-store mobile options? Well depends on how you look at it.  The naysayers have a point – especially when it comes to commerce apps – which don’t rank as consumer favorites for time spent with their phone.  Amazon is the most popular one out there – and as Karen Webster pointed out in her commentary this week, it is ranked 26th overall in App Annie’s rankings.

But then again,  it does seem if perhaps these critics are missing three things that are at least important to consider when evaluating Walmart Pay.

Walmart Pay Is Not Quite Just Any Retailer

While it is valid to note that a payment system that is limited to all but the most loyal and frequent customers has limited ability to gain traction – the caveat unstated there is that most businesses don’t have enough frequent flyers to power something like a new payments platform.  In fact it might even be fair to say this is true for all but one merchant.

That “but one” however is Walmart – simple due to is massive size, scale and customer base. Walmart has a physical locations within 20 minutes of 90 percent of American consumers, it represents a full quater of U.S. grocery sales. Walmart by revenue is the 26th largest economy on Earth, everyone on Earth will by 1.1 items at Walmart this year, and nearly 1.3 the population of the United States visits a Walmart every week.

Walmart’s loyal customer base is not measured the same way every other retailers is because Walmart’s scale and scope is just not comparable to anyone else’s.  Slightly incenting that customer base – say by making it easy to connect receipts to the already popular savings checker function or the ability to pass on discounts to boost its mobile platform’s use rate – well Walmart can make its mobile platform attractive to users in a way and on a scale probably no one else can.

Also, the critics seem to overstate that degree to which mobile apps are similar to physical cards. Mobile apps are not separate physical artifacts that need to be kept track of. They are all stored digitally in the same mobile device – it is in fact one of the major advantage pushed about mobile payments.  Consumer don’t want to carry a lot of cards.  That is why payments are going digital.

The jury remains out as to how many digital commerce apps they will use – or what digital payment platforms they will favor.

So will Walmart Pay work? That is the $64,000,000 question these days. But it at least seems fair to say that when judging it – it makes sense to keep Walmart in a category by itself when it comes to scope – and to maintain a good working understanding of the difference between card and digital payments.