By Brian Day
The announcement of Walmart Pay—Walmart’s new digital payments solution–indicates a coming shift in the mobile payments landscape. The digital wallet space, which caught the limelight with Apple Pay, is now seeing the rise of Samsung Pay, Android Pay and less anticipated payment options, like Chase Pay and the rumored Target Pay.
Walmart is one of the first retail giants to develop its own digital payment solution. The store’s payments venture may be surprising but not entirely unwelcome. With Walmart Pay, consumers can make purchases using the Walmart app. Cardholders simply link their existing credit, debit or gift cards, including those issued by credit unions, to their Walmart accounts.
As 2016 progresses, credit unions and cardholders alike will want to take note of the new up-and-comers in digital payments. Walmart Pay may prove to be the catalyst for a new era in the digital wallet battle. It will be interesting to see what 2016 brings in the following four categories:
1) Response of current digital payment providers and other retailers to Walmart Pay: While payment options available through Apple, Samsung and Google are contactless, Walmart Pay uses QR codes. To date, QR code scanning has not taken off in the U.S. However, this may not mean Walmart Pay will suffer an untimely end. Walmart is one of the first U.S. retailers to develop its own payment application, opening the door for other retailers to follow suit.
2) Limited app space on consumers’ devices: Consumers will only keep a few select apps on their devices. What that threshold is and how quickly consumers reach it remains to be seen. With the introduction of Walmart Pay and potentially other retailers joining in, consumers will have to prioritize their payment apps. One way app developers have attempted to retain real estate on consumers’ devices is by integrating additional capabilities. For example, Apple Wallet holds credit and debit cards, boarding passes and more. Credit unions need to monitor these trends in order to enable their payment cards for the most popular digital wallet apps.
3) Longer-term consumer payment options in Walmart Pay and other retailer apps: Retailers such as Walmart and Target will continue to look for payment options beyond cards in an effort to lower payment transaction costs. ACH payments are also a less-expensive option for retailers, so they may look to the system to drive their proprietary payment transaction costs.
4) Incentives provided by retailers to drive conversion: With more mobile payment options available to them, consumers face a difficult decision at the point of sale: Which app should they use to pay? Retailers providing incentives like 5-percent discounts, such as Target’s Red Card, encourage use of their payment apps at the point-of-sale.
Less anticipated responses to Apple Pay, like Chase Pay and Walmart Pay, present new opportunities (and challenges) to credit unions as they set out their digital payment roadmaps. The need for agility is key, as cooperatives may need to adjust their plans to remain relevant to increasingly digitally-minded consumers.
Brian Day is Director of Digital Payments Strategy with The Members Group, Des Moines, Iowa.