Wal-Mart’s Big Wallet Gambit

Not long after Wal-Mart Stores Inc. shook the industry last month with its announcement that the chain plans to roll out its own mobile-payment service, questions arose about its commitment to Merchant Customer Exchange LLC (MCX), the mobile-wallet consortium that Wal-Mart helped launch three years ago.

Starting in December, Wal-Mart began testing Walmart Pay, which is part of the Wal-Mart shopping app and works with most Apple and Android smart phones. A full commercial launch is expected by the middle of this year. Customers will be able to load “major” card brands along with the Wal-Mart gift card in the wallet, which will link to point-of-sale readers via quick-response (QR) codes.

Walmart Pay will work in all U.S. stores, but not at Sam’s Club locations, the warehouse-store chain that Wal-Mart owns. And that QR-code system is a proprietary technology, a spokesperson adds, so it’s not related to the QR system developed by Paydiant, a unit of PayPal Inc., for MCX.

The world’s largest retailer claims some 22 million customers use its shopping app each month. ”The Walmart app was built to make shopping faster and easier,” said Neil Ashe, president and chief executive of the Walmart Global eCommerce unit, in a statement. “Walmart Pay is the latest example … of how we are transforming the shopping experience by seamlessly connecting online, mobile and stores for the 140 million customers who shop with us weekly.”

What are the downsides? An increasingly crowded market, for one thing. Wal-Mart’s decision to offer its own mobile-payments service comes in the wake of several similar launches in recent months, including services from Samsung Electronics Co. Ltd. (Samsung Pay), Google Inc. (Android Pay). and JPMorgan Chase & Co. (Chase Pay).

Plus, no one is sure just how many consumers are really using mobile wallets. Apple Inc.’s Apple Pay service has been in the market for almost 15 months, but some experts have questioned whether it has met Apple’s expectations for adoption and usage so far. Apple does not comment on the matter.

Then there’s the matter of MCX. Wal-Mart is not only the largest member of MCX, a venture that now includes 40 major retail brands, including rivals like Target Corp. and Best Buy Co Inc., but also one of its driving forces. CurrentC, the MCX wallet, is undergoing a beta test in Columbus, Ohio, and is expected to expand, possibly nationally, this year (“Merchant Pay,” December).

Despite the Walmart Pay announcement, Wal-Mart remains a stalwart backer of MCX, which it helped found, says the spokesperson. “We view [Walmart Pay] as a complementary offering. We made a strategic decision so it could integrate other mobile wallets in the future, like CurrentC or Chase Pay,” she says.

An MCX spokesperson also says Walmart Pay is complementary to CurrentC. “We are excited to continue to work towards a national launch of the CurrentC app with Walmart as one of our 40 merchant partners,” he says.

But now, with Walmart Pay on the table, some experts question Wal-Mart’s commitment to MCX, which earlier this year replaced its chief executive and has taken a deliberate approach to mass availability. “It would indicate that they have some issues with MCX,” notes Thad Peterson, a senior analyst at Boston-based Aite Group LLC. “It may be a shot across the bow.”

“MCX has an even more uncertain trajectory if merchants like Wal-Mart are going in their own direction,” says Steve Mott, principal at BetterBuyDesign, a Stamford, Conn.-based consultancy that was an early advisor to MCX.

Mott points out that acceptance costs for major-brand cards, which Wal-Mart has historically and publicly complained are too high, and which led it to participate in the launch of MCX in the first place, may no longer be a big factor in the company’s decision making. “From a number of industry reports, Wal-Mart and some other mega-merchants have negotiated interchange down to a flat fee,” he says.

—John Stewart