Chris Hill: The mobile payment industry has been one of the more interesting industries
to watch over the last couple years, when you just look at the major players, you look
at the startups like Square, Xoom, PayPal, etc. And now, a little company by the name
of Walmart has entered the space. Walmart is launching its own mobile payment system.
They're starting small, they're testing it in Arkansas, launching it today.
Alex Scherer: Rolling it out, I believe, over the next six or nine months in the rest of
the United States, and it'll be an app that'll be available on both the Apple iPhone as well
as the Android system. I think people spend a lot of time focused on the app vs Apple
Pay, or the app vs Google Pay, as if that's the real competition. Like, is this gonna
be a blow to Apple in some way? Or make Apple customers
less likely to purchase the next iPhone?
Hill: Certainly that's what all the headline writers are thinking today.
If you just looked at the headlines--
Scherer: I think it's all like, "Walmart's Taking on Apple!" That's actually completely
besides the point in my opinion. I think that this move is just one more salvo in a very
very long-running, vicious war between merchants and the credit card companies and processors
and networks like Visa and MasterCard. And the reason I say that is because, first of
all, the Apple app is gonna be available on the iPhone just as it is on Android phones.
But if you think about what Walmart's real motivations are, they don't really care what
phone is in your pocket. They care very deeply about how much they pay every time you swipe
a card and use a payment system. In Target's case, for instance -- they want you to use
the Target card, or they want you to use the debit card network. And Walmart want you to
use your debit card, not your credit card, because their processing system, they pay
about one tenth of the cost if you use a debit card through the Automated Clearing House
network, as opposed to using Visa or MasterCard's rails.
So, creating this app allows them to have control of the customer data, and eventually,
if it's successful, to promote more heavy usage of debit cards, Walmart gift cards,
and anything other than credit cards, which they pay very steep fees for.
Hill: I'm not rushing out to buy shares of Walmart because of this news, but I like the
way they're going about this. I mean, I'm sure that when they were having these discussions,
someone must have put forward the idea, "Look, why don't we just buy Square?" Or, "Why don't
we just go out and acquire a startup or something like that?" And I like the fact that they're
going with their own system, and rolling it out over time.
Scherer: I think if this has any real implications for anybody in particular, it's going to be
for the MCX network, or, the currency system, which Walmart was a huge proponent of, one
of the leaders of, when it was created, and that was a wallet that was basically owned
by a lot of large merchants like Rite Aid and Best Buy and Walmart and on down the line,
and that was specifically trying to create a system that was an alternative to Apple
Pay and Google Pay, but had a ton of delays, it's not very easy system to use, and Walmart
coming out with their own proprietary system that basically is in direct competition to
what they had been supporting before, I think pretty much spells the death of the currency
network.
So, the implications outside of Walmart, I think, are that you're going to see those
other companies, the Targets, Best Buys, Rite Aids of the world, drop currency as a system
in the future, and probably more strongly grasp partnerships with Apple and Android.
Hill: Do you think it does anything to speed up the death of the penny? The physical penny.
Scherer: God, I can't even remember the last time I used a penny. I was cleaning out my
basement last week, and I found a Ziploc bag that was so heavy, there was nothing but pennies
in there, and I didn't spend the time counting it out, but there must have been three or
four hundred pennies in there. And I couldn't even conceive of why I would have put a stack
of 300 pennies into a Ziploc bag before.
Hill: You got a Coinstar machine anywhere near your home?
Scherer: We do, yeah. There's one in Wegmans, actually.
Hill: There you go!
Scherer: We do go to Wegmans a lot.
Hill: We were just talking about that before we started taping.
Scherer: I'm a Wegmans champion.
Hill: You're one of Wegmans best customers.
Scherer: Unfortunately.