Walmart is considering switching its credit card business to Capital One from Synchrony Financial, Bloomberg reported, citing unnamed sources. "While we don’t comment on rumors or speculation, I can confirm that we issued [a request for proposal] for our credit card business," a Walmart spokesperson told Retail Dive in an email.
The retail giant is "seeking a partner that can support its aspirations for Walmart Pay" mobile payment platform, according to Bloomberg. Walmart could also boost loyalty to certain categories, such as grocery, through its credit card program, the news service also reported.
Walmart is the world's largest retailer, and its store-branded credit card is the largest business of that type as well, according to a Susquehanna Financial Group analysis cited by Bloomberg. A switch in partner banks for the credit card is a major undertaking, however, as Costco found out in 2016 when it moved from a 17-year partnership with American Express to Citigroup for its store card.
When Costco moved its longstanding store-branded credit business to Citigroup, it banked on better customer perks to ease the transition. It was a bumpy road, however, as cards were sent out late and customers had trouble activating them.
Two years later, those issues have been resolved and Costco executives say the business is as robust as ever. But Walmart is unlikely to provide the level of incentives that a Costco card does, which include cash back on gas, restaurant and travel spending. Walmart's customers are generally less wealthy and much older than Costco's, and many don't even have a checking account, much less a credit history.
Most so-called "unbanked" Americans are in that situation because of financial circumstances, though about a third choose to be because they don't trust the banking system. Nearly a third of underbanked consumers (30.8%) say it's because of high or unpredictable fees, according to the FDIC. Walmart has traditionally served such consumers with services like paying for online purchases with cash in stores and even some banking services.
But even a somewhat more premium card could appeal to the wealthier consumers that Walmart is hoping to steal away from the likes of Amazon and Target. The retail giant, in addition to e-commerce business units like Jet and Bonobos that don't carry the Walmart name, has revamped its flagship merchandising in furniture, home and apparel to widen its reach.