Capgemini’s annual World Payments Report is always interesting reading for money nerds like me, and the just-released 2025 report is no different. There is a lot of focus on account-to-account (A2A) payments in the report, just as you would expect given current trends, and it goes so far as to say that A2A’s potential to cannibalize traditional card payments (a significant revenue source for banks) “demands a strategic response”. Yes, it does, because the cannibals are not other banks, but strategic competitors able to change the direction of the payments industry. And one of them is Walmart.
If banks do nothing, they will end up as pipes. Brazil provides a useful case study that illustrates this dynamic well. The Pix instant payments scheme has expanded rapidly to the point where it has some 165 million users and is an existential threat to the domestic debit network Elo. Younger consumers, raised on Pix, have no interest in acquiring or using cards. No wonder banks are worried about losing their card businesses and the interchange they generate.
Competition From Walmart
But losing it to who? Well, top banker Jamie Dimon has previously said that competition from Big Tech and Walmart is here to stay and that he sees competition from Apple and Walmart “intensifying”. It is interesting that alongside the usual Big Tech players, he specifically points to Walmart. Interesting because when Walmart speaks, banks listen. Hence the news that the dominant retailer plans to step up its online pay-by-bank option in 2025 using both The Clearing House Real-Time Payments network and the Federal Reserve’s FedNow instant payments network will be studied by banks, fintechs and other retailers with some interest.
(“Step up” because Walmart introduced Walmart Pay earlier this year but the transactions typically took three days to process. Now customers will receive immediate updates to their bank accounts and Walmart will receive the funds right away.)
If Walmart succeeds in changing the dial around retail payments in this way, other retailers will follow with their own products. After all, the concept of “decoupled debit” has been around for years (see for example, Target RED) and is based on the linking of a card issued not by your bank to your bank account so that when you use the card to pay, the retailer’s bank gets the money directly out of your account and into theirs. Moving to a “decoupled app” solution is an obvious way forward.
I think it is easy to see that reimagining this solution round instant payment networks and switching from a “pull” to a “push” model (especially when that push is across a data-rich 20022 connection) works better for the customer and retailer. It may not work better for the bank, the goal of technology progress is not to defend the banks’ business models from change.
(It may not work better for the card networks either, but since they are smart they are already active in this space.)
Putting the pay-by-bank capability inside Walmart’s own digital wallet could have additional benefits including anti-fraud measures (such as user authentication) plus the integration of loyalty, coupons, in-store offers, and so on. As a consumer, I find that a compelling proposition.
This is why when it comes to payments, not only Mr. Dimon but many other observers have long felt that the real threat to the big banks will come not from fintechs and payment-specific startups but from the key players in adjacent sectors. Big tech is leading the charge on wallets now, but the large retailers such as Walmart and Target are building their own wallets, through which they could give rewards to loyal customers. As with other retailers, one of the attractions for the big chains is that their app can combine payments, loyalty and spend tracking in one, and a simple quick QR scan, tap or palm wave is all that is needed to get everything done. I’m sure this combination (and, if I remember correctly, prescriptions) are what attracts consumers to using the CVS app, where shoppers scan a QR code on their phones to pay.
Walmart In Financial Services
Walmart in particular has massive potential in the financial services sector. It has a huge customer base, many of whom are rural and on modest incomes. Many of them will be unbanked or underbanked. These people don’t need particularly whizzy tech. They need deposit services and credit. So what makes sense is for Walmart to offer core banking services, even if they do it through their web app rather than with bank branches within box stores. A low-cost debit card which allowed customers to take advances on their next pay cheque, a wholly-owned credit card and unsecured personal loans would all make sense. A Walmart app that integrates their existing investments in e-commerce, logistics, advertising and so on is a strong proposition..
So customers will end up with hundreds of apps on their phones, one for each of the retailers in the world? I do not think so. I remember a Comscore survey found that over half of American consumers would be happy to have four or more retailer apps on their phone and I remember something I looked at for a UK client at around that same time. From memory, the overwhelming majority of household disposable income in the UK goes to a handful of retailers per household.
Put these approximations together and consumers will not have hundreds of apps on their phones to deal with every retailer. For the retailers they visit frequently (e.g., Starbucks) they will have the retailer app and use it. In other cases they will just use some third-party payment app (e.g., their bank) or a convenient wearable like a bracelet or key fob . This will give retailers new opportunities to add value and new control over identity and payments. The consumers’ cards, however, will remain at home in a drawer, their sophisticated designs, clever branding and innovative materials wasted.
The banks’ strategic response should be to add value around the transactions, not to try and survive off of shrinking interchange margins in the face of competition from non-card alternatives such as Walmart Pay-By-Bank. In an A2A world those services are safety and security, data and decisioning not only the payments themselves.
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