Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart
@DTPaymentNews
Wal-Mart Stores Inc.’s deal with JPMorgan Chase & Co.’s ChaseNet processing network, announced Thursday morning, proves that the nation’s biggest retailer can make peace with the big card brands if the terms are right. And it may indicate bigger prospects for Chase’s ambitious merchant-acquiring operation.
Under the deal, whose terms take effect immediately, Wal-Mart will use ChaseNet’s closed-loop network to process all Chase Visa credit and debit card transactions at its more than 5,000 U.S. Walmart and Sam’s Club stores and on the Sam’s Club Web site. The chain already has been using ChaseNet to process these transactions for Wal-Mart’s e-commerce site.
Figures were not immediately available regarding the percentage of all Wal-Mart card transactions the deal will account for, though Chase ranks as the nation’s largest issuer and claims it has 94 million U.S. credit and debit cards in circulation, most of which are Visa-branded.
A Wal-Mart spokesperson refused to comment on how long the contract will be in effect.
Nor were pricing terms available Thursday, though they are likely substantially more attractive than the terms under which Wal-Mart has been accepting Visa cards generally. “Engaging Chase with a direct processing relationship has been a priority for Wal-Mart for some time,” said Mike Cook, senior vice president and assistant treasurer at Wal-Mart, in a statement. “Wal-Mart is always looking for innovative ways to improve the payment experience for our customers while also creating competition in the payments industry.”
With ChaseNet, transactions remain within the banking giant’s system and so avoid standard card-brand interchange. This allows the bank’s Chase Commerce Solutions acquiring unit to process transactions at a total acceptance cost below card-network rates. Chase announced the Wal-Mart deal calls for “guaranteed, fixed-rate pricing” for the length of the contract, without giving details. The rate likely includes a ChaseNet rate plus a Chase Commerce fee and applicable Visa fees.
The announcement makes no mention of Chase’s Chase Pay mobile wallet, which is set to launch more broadly later this year, though sources contacted by Digital Transactions News say the deal is likely a precursor to Wal-Mart acceptance of the wallet. Currently, Chase Pay is available on some Web sites. Wal-Mart has already launched its own wallet, Walmart Pay, chainwide as part of its shopping app. “We wouldn’t speculate on that,” the Wal-Mart spokesperson said regarding any plans for Chase Pay.
The chain is a charter member of the Merchant Customer Exchange LLC retailer consortium, whose CurrentC mobile-payments service was suspended in June after a relatively brief nine-month pilot in Columbus, Ohio.
The deal could hold longer-term significance for Chase as much as it does for Wal-Mart, observers note. “What it does raise is the specter of whether we’re seeing ChaseNet in a transition to its own payment-acceptance network, competing with Visa,” says Steve Mott, principal at BetterBuyDesign, a Stamford, Conn.-based payments consultancy, in an email message.
As for Wal-Mart, the deal for Chase Visa card acceptance is particularly notable in light of the retailing titan’s long history of bitterly protesting card-acceptance costs. This includes recent battles with Visa over both pricing and transaction-routing issues. In May, Wal-Mart sued Visa in New York State court over what it alleges are efforts by the network to hinder Wal-Mart’s ability to use alternative debit networks for EMV chip card transactions.
And, prompted by a dispute over acceptance costs, this month Wal-Mart’s Canada unit said it will expand to 16 stores in Manitoba a ban on Visa credit card transactions that started with three stores in Thunder Bay, Ontario. The expansion is set for Oct. 24.
Some experts see wide ramifications in the Canadian dispute. “Canada is looming as an existential threat to Visa,” says Mott. “If Wal-Mart customers don’t care about using their Visa cards—and it appears they don’t, so far—we could be seeing the possibility of merchants getting up their spine and kicking a particular brand out of their stores, like Costco did with American Express.”
