Walmart is mulling shifting its branded credit card business to Capital One Financial from Synchrony Financial as it aims to expand the company's mobile payments offering.
Bloomberg, citing people familiar with the matter, reported that Walmart has narrowed the list of credit card partnership bidders to the two lenders, although talks are still going on. Walmart reportedly wants a partner that can support its Walmart Pay.
News that Walmart could dump Synchrony Financial sent shares lower in trading on Thursday (July 12). Co-brand and private label credit cards are a good business for banks. The Walmart-branded credit card program is the biggest in the U.S., and is up for renegotiation between this year and next year, noted the report.
For Synchrony, the partnership with Walmart accounts for greater than 10 percent of the interest and fees the bank earned on the loans last year. Bloomberg also noted that the credit card partnership is a way for Walmart to push back from Amazon, which has a deal with JPMorgan Chase and Synchrony for its co-branded credit cards. According to the report, Walmart may not offer big cash back rewards on its card, because that would go against offering low prices to the masses, not just certain customers. However, it could boost loyalty for certain business lines.
Bloomberg reported that Walmart is very cognizant of the risk involved when moving a credit card portfolio to a new user. Citigroup and Costco, for one example, faced many customer complaints when Citigroup struggled after taking over the portfolio.
Walmart Pay has been out in wide release for a little over a year — and in that time, it has made some pretty notable strides. According to the PYMNTS/InfoScout data, in a little under eight months, Walmart Pay ranked as the third most frequently used mobile wallet in the U.S. — handily edging out much longer-term participants in the mobile wallet wars, such as Android Pay. The same data noted that among consumers who had used Walmart Pay, the majority found it easier to use, faster at checkout and more convenient overall than swiping a card.