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2 March 2012
Bart Narter

I have often stated that the digital wallet enables the ascendency of store cards, since it becomes much easier for a customer to carry a myriad of cards and autoselect the appropriate card at POS. Do I want to carry 50 store cards and have to find the right one? Physically, the answer is no. Electronically, it isn’t as much of a problem.

Retailers are more than willing to compensate customers for switching to a store card. Target, Lowe’s and Kohl’s all pay up to 5% to customers willing to use the store card. It allows them to avoid interchange and get customer specific SKU level data they wouldn’t otherwise have.

The Wall Street Journal just announced that Wal-Mart, Target and others are creating a new payments scheme.

I didn’t see the retailers banding together to create another payment scheme. I also frequently state that a payment scheme needs to make three groups of people happy: the consumer, the merchant, and the scheme operator/FI. To make a mobile payment scheme, one also needs the co-operation of the mobile network operators (MNOs). Let’s look at this retailer driven scheme through this lens.

  • Consumers love it: They get very rich rewards.

  • Merchants love it: They get customer specific purchasing data and have already shown it is worth 5% to them.

  • The payment scheme is the group of merchants. They are launching the service, they clearly want to do this.

  • MNOs may be not so interested. They have their own payment scheme, the ever-evolving ISIS. They will want their pound of flesh to access the secure element on the phone. Should this retailer group work with ISIS?

  • The major card networks are not amused, but can hardly prevent this from going forward.

If this venture can figure out how to work with the MNOs, it could gain serious traction.

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