Here’s The Big Payoff Walmart Gets From Its New Mobile Payment System

Earlier this month, Walmart announced the launch of its in-store mobile digital payment system.

One Walmart watcher — Chris Bryson, CEO of commerce personalization provider Unata — pointed out to us recently that the new payment platform gives the giant retailer the benefits of a loyalty card program, but without the costs.

The Toronto-based Unata provides individualized digital experiences for grocery store customers that integrate purchase history, “digital circulars,” loyalty programs and website personalization. Bryson said Unata is not involved with Walmart.

Walmart Pay allows customers with its mobile app to pay at any checkout lane, using an iOS or Android device and any major credit card, debit, pre-paid or Walmart gift card. It’s now rolling out to select stores, with the U.S.-wide launch completed by mid-2016.

Credit and other payment cards are attached to the user’s account, and the payment is made through the user’s account. Normally, Bryson pointed out, digital payment systems — such as Apple Pay or credit cards — do not provide retailers with contact info and purchase history. Those payments are generally just passed through a retailer’s terminal.

“The Equivalent Of One”

A retailer like Walmart doesn’t usually get into a loyalty program, Bryson told me. That’s because, as an Everyday Low Price big box retailer, it doesn’t generally have the room in its margins to carry the one to one-half percent cost of loyalty programs’ incentives, like discounts or points.

When loyalty programs began “a few decades ago,” he said, “the hope was that customers would come back to your store because of the incentives.”

But, nowadays, the bigger value to the retailer is that a loyalty program provides personal contact and purchase data, allowing the store to target its best customers with personalized offers via mail, email or the store’s website.

What Walmart is doing, he noted, is getting its Pay customers’ contact info and purchase history without maintaining a loyalty program. This info could also be used for alerts about when the kind of products the customer previously purchased have dropped in price. Or it can make recommendations about similar products, Netflix-style.

“Walmart has not publicly launched a loyalty program,” he said, “but the equivalent of one.” He said he wasn’t aware of any other major retailer that has done this, and pointed out that Walmart “has made it clear personalization is core to their strategy.”

“It represents a new approach,” he said. “Getting all the benefits of a loyalty without necessarily launching one.”

The “Secret Weapon”

As he elaborated in a blog posting on the subject:

“One of Walmart’s largest weaknesses to date, relative to their competitors, has been their inability to understand what their shoppers purchase in their stores at an individual level. (…)

“Last October, Walmart tried to make headway on this weakness by remodeling their homepage to be personalized at the individual level. They were able to easily achieve this for their online shopping audience, for whom they have an online purchase history. What was missing was the ability to personalize their web and mobile experience for their in-store shoppers, for whom they are unable to track purchases.

“So for many years, their competitors have had this secret weapon over them, which has enabled them to track shopper purchases both in-store and online, and in turn deliver personalized customer experiences across the shopping journey, creating stronger shopper relationships and loyalty.”

The retailer said its app is actively used by 22 million customers every month, and added that it places among the top three retail apps in the Apple and Google app stores. In addition to the new payment function, the app allows customers to pick up an online order at one of the chain’s stores, find a product in the store and refill prescriptions in the pharmacy.

To pay, a user opens the app at any store register, chooses Walmart Pay, activates the camera, and scans a code at the register. This connects the customer’s account to the register, so that any items scanned by the store person are charged to the customer.

The Pay option could provide customers with a more convenient method than hunting in their wallet or purse for a credit card.

Bryson suggested that, if it wanted, Walmart might someday offer a mobile-only loyalty program with discounts or points. But, if the current Pay program delivers the required personalization and targeting, the question is why the retailer would want to.