Walmart (WMT) announced Thursday it's launching its own mobile payment system, hoping to stave off competitors such as Apple (AAPL) , Google (GOOG) and Samsung and dealing a blow to a separate industry-led effort.
Walmart Pay will be accepted at Walmart stores near Bentonville, Arkansas starting this month, and it will roll out to the rest of the country early next year.
Walmart has long been part of a consortium called the Merchant Customer Exchange, or MCX, a group of retailers that has been developing a mobile wallet called CurrentC, but that wallet is still only in a pilot test. Walmart likely wanted to create its own mobile wallet to gain more control over the whole system and have the ability to track purchases and integrate deals.
"There is an obvious slowdown and probably infighting at MCX, which forced Walmart's hand to do their own system," said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. "Also, with MCX, members need to share the user information with everyone else, and given Walmart's size, they probably don't want to do that."
If other large retailers follow in Walmart's footsteps, MCX could start to unravel entirely.
But whether or not MCX is pushed out of the equation, that still doesn't mean Walmart will necessarily have any success on its own.
"Walmart Pay does have a chance for success, but only if they tie it to incentives and if Walmart can iron out the expected consumer challenges with their implementation," Moorhead said. "Compared to something like Apple Pay, Walmart Pay is a chore and less reliable."
Unlike Apple Pay and Android Pay -- which use near-field communication technology that lets consumers tap their phone to pay without even having to unlock the device -- Walmart Pay uses QR codes, which require the consumer to open the Walmart app, find the Walmart Pay feature, and take a picture of the bar code.
Plus, even Apple Pay and Android Pay are struggling to convince consumers that mobile payment systems are worth using.
One big problem with mobile payment systems is that there isn't exactly a problem to be solved. Credit cards and cash work just fine. So for Walmart to convince its customers to use Walmart Pay, it'll have to create a really compelling reason, possibly through looping in a loyalty program or discounts.
"The critical success factor for Walmart Pay will be its value proposition to the end user," said Jordan McKee, an analyst at 451 Research. "In its current form, it leaves much to be desired. A narrative around loyalty, reward and coupon integration is noticeably absent and sorely needed."
Starbucks (SBUX) seems to be one of the only players to have had much luck with its own mobile payment system, likely because of its strong rewards program, but if Walmart could replicate that success, we could soon be seeing many more retailer-specific wallets.
"By introducing its proprietary Walmart Pay mobile payment app, Walmart is upping the ante for its competition by becoming the only retailer with this capability, and we view this move favorably," said Moody's lead retail analyst Charlie O'Shea. "The question for other retailers now is whether to play follow the leader and make this type of investment, or to continue to utilize third-party capability."