Wal-Mart Stores Inc. has given customers the chance to use their smartphones to pay for purchases at any of its stores nationwide, but some analysts and experts believe Wal-Mart Pay's success will depend on the retailer's ability to give customers incentives for using it.
Wal-Mart said earlier this week it had completed the nationwide rollout of its mobile payment service, which was first announced in December. Wal-Mart Pay, which is available at every register in the retailer's 4,600 stores, is offered through the Wal-Mart app and works with any Apple or Android device. It also works with any credit, debit, prepaid or Wal-Mart gift card.
Daniel Eckert, Wal-Mart's senior vice president of services for U.S stores, said earlier this week the service was designed as part of the retailer's strategy to improve shopping for customers.
Eckert did not provide the number of shoppers who have used the mobile-pay service since its introduction, but reported that 88 percent of Wal-Mart Pay transactions are from repeat users. The Wal-Mart app -- which has many other features -- has more than 20 million active users.
Ryan King, chief executive officer of Fort Smith-based Guardian Payment Systems, believes customers will need more reasons to become long-term users of the service.
"I just don't see where the incentives are going to be aligned for a large majority of consumers to start using it," King said. "I think they're going to get a minority of early adopters that think it's kind of cool and trendy and that sort of thing. But I just don't see why a large majority of their consumers are going to change their behavior when there's no incentive."
Wal-Mart Pay works when a customer opens the retailer's app at a register, selects the service and scans a QR code. The sale is then charged to a debit, credit or gift card linked to the account.
The retailer said the payment service is safe and secure because it takes place behind Wal-Mart's firewalls. No payment credentials are stored on a customer's phone or exchanged at the point of sale.
The in-house payment is the only such mobile service accepted by Wal-Mart. Eckert said the retailer has no immediate plans to add third-party services like Apple Pay and Android Pay.
"We are really focused right now on pulling Wal-Mart Pay capability through and ensuring that's the best shopping experience we can afford our customers today," Eckert said.
Wal-Mart introduced the retailer-specific option as mobile transactions continue to rise worldwide, but customers remain slow to replace debit or credit cards with smartphones at cash registers.
King believes there just hasn't been a reason to leave the wallet at home, although mobile payment has been gaining some traction since the introduction of Apple Pay in 2014.
More than 25 percent of U.S. smartphone owners use payment apps at least once a month, according to recent data compiled by Dallas-based research and consulting firm Parks Associates.
The firm said more than three million retailers now accept popular payment services like Apple Pay and Android Pay, but its data indicates consumers currently prefer retailer-specific applications.
"To be frank, I think this has a lot to do with consumers' loyalty to certain brands," said Harry Wang, director of mobile and health research with Parks Associates. "If you have a strong loyalty to the brands, you're more likely to shop at the place and you want to experience the brand in every angle possible, and the payment is part of the experience. Especially if a retailer includes loyalty cards and discounts to consumers that provide more incentive to use those applications."
Wang highlighted Starbucks, which processes 5 million mobile-pay transactions per month. The company rewards its customers who use the mobile payment option with coupons and other perks.
Dwight Hill, a retail consultant and partner with Chicago-based McMillan Doolittle, said Starbucks' ability to educate customers on the convenience of mobile-pay services has been key. He believes Wal-Mart Pay could be well-received, as well, but it's important to develop reasons -- like coupons or rewards -- to encourage customer loyalty with the service.
"Otherwise pure convenience may not be enough of an incentive for consistent usage," Hill said.
Brian Yarbrough, a retail analyst for Edward Jones, said Wal-Mart Pay is another indication the retailer is working to boost sales.
"I'm not convinced it's going to make much of a difference, but give them credit because they're trying a lot of things here," Yarbrough said. "They're really trying to be on the forefront and trying to be more convenient and deepen that customer relationship, and this is all part of that."
There are benefits for the retailer. Wal-Mart will be able to to collect purchase information and other shopping habits of customers who give the retailer permission. Wal-Mart could use the information to continue to connect with individual customers by creating features like smart lists that may make shopping easier and faster.
While the retailer doesn't have any current plans to offer incentives or loyalty programs specific to its Wal-Mart Pay rollout, Eckert said he would "never say never."
"The feedback we've gotten from Wal-Mart Pay is the value they're getting out of that improved checkout experience is quite a reward enough to be advocates and repeat users," Eckert said.
Business on 07/09/2016