Why Walmart poses a major threat to the mobile payments hierarchy



It's been roughly nine months since more than a dozen leading U.S. retailers including Walmart, Target, Best Buy, Sears and 7-Eleven first banded together to create Merchant Customer Exchange, a nationwide mobile commerce network designed to support smartphone-enabled purchases, consumer offers and mobile marketing promotions. The MCX initiative remains a work in progress, but here's what we know: Its ranks now encompass more than 30 merchant brands representing $1 trillion-plus in annual sales, 80,000 stores, 4 million employees and 700 million payment and other customer accounts. All of those merchants will accept the forthcoming MCX wallet, a cloud-based solution supporting barcode-enabled transactions: The wallet will run on digital security firm Gemalto's Allynis Mobile Payment platform, and MCX also will leverage Gemalto software to offer branded smartphone applications as well as an SDK allowing retailer partners to embed wallet functionality within their own existing apps.

The race to dominate mobile retail commerce is still wide open, but comments from Walmart Global Head of Mobile Gibu Thomas underline why MCX poses such a significant threat to like-minded payment efforts including Google (NASDAQ:GOOG) Wallet, carrier-led Isis and PayPal. Speaking at this week's CTIA Wireless 2013 conference in Las Vegas, Thomas said that Walmart is turning to mobile technology to redefine the shopping experience for its brick-and-mortar patrons, adding the company is striving to create mobile tools that are "indispensable for the customer when shopping in our stores." For example, the current version of the Walmart app includes a smart shopping list that keeps a running spending total--it also spotlights products available in that specific Walmart store, directs users to an item's location within the store and offers access to local ads. Thomas said future versions of the Walmart app will recommend products designed for special dietary needs, honor digital coupons and even predict items that you regularly buy: "The best shopping list is one you don't have to create," he explained.

Thomas also confirmed that Walmart is continuing to test a new system enabling shoppers to scan items using their Apple (NASDAQ:AAPL) iPhone, then complete their purchase at a self-checkout counter. Reuters first reported on the Scan & Go program last fall; Thomas said that research is still in the early stages, with Walmart continuing to experiment with different approaches to the concept.

Thomas noted that more than half of all Walmart customers now own smartphones, a segment that increases to almost 75 percent among consumers under age 35. In addition, customers who have downloaded the Walmart app spend 40 percent more time in-store and make more than two trips per month, with "highly engaged" app users spending 70 percent more time at Walmart and making four or more trips to their local store per month.

None of this is encouraging news for m-commerce platforms other than MCX. Assuming Walmart even agrees to support rival services like Google Wallet and Isis--a huge question mark--how can anyone compete on Walmart's turf? No other mobile payment application is going to come remotely close to offering Walmart shoppers the custom functionality and utility of the Walmart app: It seems unthinkable that, say, Google Wallet could ever remind a Walmart shopper to buy detergent, lead him directly to the cleaning supplies aisle, allow him to scan his purchase and complete payment at self-checkout, but the MCX-enabled Walmart app will support that scenario and countless others. It's the same story across other MCX partners: Consider all the features possible in something like Southwest Airlines' MCX-equipped app--not just in-flight payments, but traveler rewards, upgrade deals, etc. Why would Southwest passengers consider another mobile payment option with limited bells and whistles? Google Play, Isis and PayPal may have first-mover advantage on MCX, but the MCX brands own the stores, which means they own the mobile customer experience, too. Everyone else is on the outside looking in.--Jason