Walmart puts Capital One in its wallet with credit card deal

Dive Brief:

Walmart has picked Capital One as its new primary credit card partner, the retailer said in a press release Thursday. Capital One will begin issuing cards under the deal in August 2019, according to the release.
Capital One beat out Synchrony, Walmart's current credit card partner, to become the exclusive issuer of cards for use only at Walmart stores and websites, as well as co-branded cards for broader use, according to The Wall Street Journal, which first reported the deal. The move comes about a week and a half after Walmart told Retail Dive via e-mail, following reports it was in talks with Capital One, that it had issued a request for proposal related to its credit card business.
Synchrony, which is the largest issuer of retail store credit cards, had been issuing Walmart cards since 1999. The retailer represents almost 20% of Synchrony's store credit card business, and there remains about $10 billion in existing balances of its Walmart cards, the Journal reported.

Dive Insight:

Walmart's deal with Capital One stands as the most notable decision by a retailer to change credit card partners since Costco jilted American Express for Citigroup back in 2016.

The Journal story suggested that Capital One presents Walmart with a store credit card partner that is more forward-thinking about payment technology, as the retail giant looks to invest more in mobile payments, self-checkout and other payments and finance innovations.

It's not clear exactly what Capital One might bring to the table in that regard or that Synchrony could not. But the evolution in payments technology — including everything from EMV chip cards to mobile payments to installment loans (which Walmart is reportedly eyeing) — is providing retailers with opportunity and a sense of urgency to rethink their payment ecosystems.

Other than that, this switch appears to have a lot to do with some common, age-old disputes between retailers and card issuers. Walmart felt Synchrony's transaction fees were too high, and that it didn't approve enough card applications, according to the Journal. At the same time, Synchrony reportedly felt Walmart didn't put enough marketing energy behind its card offerings. All of the above can cause long-time partnerships between retailers and credit card issuers to hit the rocks.

But these partnerships are becoming even more sensitive to change as retailers begin to realize that payments and other financial services could be valuable in strengthening customer loyalty. Amazon, for example, appears to be edging into offering more financial products at least partially for that reason. Walmart may be looking for a partner that can allow it to keep pace by doing more with its cards and similar payment offerings.