Walmart Pay bets on the Starbucks effect

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US supermarket giant Walmart has just launched its payments app nationwide, meaning that customers can use their smartphones to check out in 4,600 stores across the country. The firm will be looking to replicate the phenomenal success of coffee chain Starbucks’ loyalty and payments app, which has proven the potential for retailers to own a big piece of the pie in mobile payments.

How does it work?

Available through the Walmart app on both Android and iOS devices, customers set up a Walmart account and register their preferred credit, debit or credit card (or Walmart gift card). At check-out they have to click on Pay within the app, enter a 4-digit pin or use Touch ID and then hold the phone over the QR code on the register.

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Starbucks effect

Walmart was initially part of the largely doomed Merchant Customer Exchange (MCX) service, launched by a group of retailers in retaliation against Apple Pay and other rival mobile wallet services.

Mobile payments is a noisy, crowded and still young market in the US. Walmart’s chances are pretty solid. Its Walmart app already has more than 20m users, which means that it’s plugging its payments service into a pre-existing loyal customer base. As we know, it is the everyday, smaller transactions that are the gateway for new payments technologies and grocery shopping slots into that behavioural category.

Similar to city workers hustling through Starbucks to get their pre-meeting caffeine fix, Walmart is betting that customers trying to get their kids, pets and shops through the check out as quickly as possible will increasingly want to just handle paying on their phone rather than delving about for their wallets.

“We want to make every day easier for busy families,” says Daniel Eckert, senior vice president, services, Walmart U.S. “We’re connecting all the parts of Walmart into one seamless shopping experience with great stores, easy pickup, fast delivery, frictionless checkout and apps and websites that are simple to use.”

Walmart’s heft makes it a threat in the mobile wallet space. It says that each week nearly 260m customers go to its stores, with 11.527 premises worldwide.

Starbucks said in its most recent earnings that mobile order and pay usage doubled year on year with the firm now processing 8m transactions on mobile per month. The firm also told MarketWatch that 41% of Starbucks transactions in the US and Canada are being made on a Starbucks card and 24% of transactions in its stores are made via its app. With 12m active users in Q2 and a reported USD1.2bn in value loaded onto its cards, this is a serious player in the developing mobile payments space and Walmart wants to do the same.

PayPal’s acquisition of Paydiant, a service that helps retailers to build in loyalty and payments tools to their apps, points to the role brand and loyalty is and will play in the adoption of mobile payments services.

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Walmart by the numbers

Launched last December, Walmart Pay has already been operational in the US, with the firm saying that customers are not just making one-off payments using the payments app. It claims 88% of transactions come from repeat Walmart Pay users. The Walmart app is designed to keep its customers loyal, with services including refilling a pharmacy prescription and building a gift registry to finding where an item is located in store as well as complimenting its online site.

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