Payments 3.0: Get Ready for ‘Walmartcoin’

While Facebook has gotten the lion’s share of attention for its attempt to launch a digital currency, the real future of digital-currency payments may lie with the nation’s largest retailer, Walmart Inc.

Walmart, based in Bentonville, Ark., filed a patent application on Aug. 1 for a “system and method for digital currency via blockchain.” The company’s intention is to create its own version of Bitcoin—a “Walmartcoin,” if you will—but it has bigger plans than creating a cash surrogate for the Internet. The digital currency could give the retailer the ability to offer long-sought-after banking functions, as well as a way into government benefits and the payroll business. This may enable the retailer to shape the behavior of everyone who interacts with it.

Although Walmart did not respond to a request for comment, its patent application reveals not only the company’s plans but also interesting possibilities for digital currencies in general.

The application describes the underlying technology as “generating one digital currency unit by tying one digital currency unit to a regular currency; storing information of the one digital currency unit into a block of a blockchain…overlaying the one digital currency unit with customer purchase history….”

In other words, Walmart would use a blockchain to issue digital currency and track a customer’s purchase history. While it describes a distributed ledger, no mention is made of who would maintain the ledger. Blockchain advocates assert that the value of the blockchain primarily comes from three factors. First, the blockchain is public so that anyone can see what happens in it. Second, the blockchain is distributed so that no one person controls it. Third, multiple entities generate each block, which means that the ledger is unchangeable.

If Walmart controls the entire blockchain, then its openness and immutabality could be questioned. For a digital currency used only at Walmart, a closed blockchain might not be a problem, but given Walmart’s ambitions, these questions might not be so simple.

The key to understanding where the retailing behemoth wants to go is the connection between the digital currency and the customer purchase history. The patent application says this connection will give the company the ability to better understand shoppers’ spending and thus give it more ways to influence their behavior. Walmart says it could offer discounts and rewards and adjust prices when people pay with “Walmartcoin.”

The company also could restrict how Walmartcoin is used. It says this restriction capability might be good for giving money to kids, directing consumer spend, and to control what recipients of government benefits may buy if those benefits were delivered in Walmartcoin. It also says that it could create a new kind of gift card that “enabled by the digital currency system could spend themselves before the card’s 24-month life expires.” Furthermore, the application describes how the currency could be used by companies or individuals to pay for gig work.

The prospect of a retailer-specific digital currency raises a number of questions. For example, what rules and laws would apply to it? Would it be treated like a gift card balance and be subject to escheatment if it went unused after a certain period of time? With growing concerns about privacy and financial health, would shoppers accept digital currency that tracks their every purchase and gift cards that spend themselves? Will regulators accept it?

Walmartcoin would be the combination of a number of tools that Walmart has tested in various forms over the years and would constitute its entry into banking. It would also give Walmart customer data that would rival what Amazon, Apple, and Google can gather.

—By Ben Jackson, bjackson@ipa.org