Target Launches Target Wallet

The retailer quietly adds mobile payment capability to the Target app

After years of development, including a failed partnership with Walmart, Best Buy, and others as part of MCX, Target quietly rolled out the their ‘Wallet’ mobile payment feature this weekend. The functionality marks the next step in Target’s mobile app journey, after previously consolidating the popular offers application, Cartwheel, into the relaunched Target app. Here are a few observations about the new functionality.

New ‘Wallet’ Button on Bottom Navigation

While we’ve yet to see any official marketing for the payment capability, the in-store and in-app branding indicates that the new feature is part of Target ‘Wallet’. This departure from the unofficial industry standard of calling everything ‘Pay’ actually makes sense given that the feature set is home to payment cards, and offers/coupons via Cartwheel. From the user perspective, Wallet simply replaces the Offers only barcode with a new one that also handles payment and is accessed via a new Wallet tile on the bottom nav of the Target app.

Loyalty Interaction Drives Payment Opportunity

One of the things that has made the Walmart Pay functionality so successful is the way the company has integrated Coupons and Payment into the same QR code, and encouraged the user to present the phone any time during a transaction. This ensures that customers aren’t having to make a payment method decision (like they are forced to do with Apple Pay or other wallets) and are instead using the Walmart app as more of a loyalty card with payment simply wrapped into the same experience. This models behavior users are already used to doing with everything from Starbucks to their local grocery store savings card (minus the payment), and is the same approach Target took.

For many Target customers who already use Cartwheel, the checkout experience is mostly the same: scan items, present phone barcode to apply savings, and pay. Only now, if the user has linked their Target REDcard, payment happens automatically without any payment terminal interaction. It actually feels quite magical. If you aren’t already a REDcard user, then you are out of luck, as the Wallet currently only supports the REDcard as a payment option.

REDcard or Bust

One topic that often comes up as retailers increasingly deploy mobile wallets is the fact that by enabling these wallets, the transactions shift from Card Present interchange rates to Card Not Present rates. The price difference between these two transaciton types can be significant for a retailer the size of Target, and undoubtedly plays a big role in their decisions around card enablement

As previously mentioned, the Target Wallet currently only support Target REDcards for payment. There is mention in the app of Gift Cards coming soon, but no mention of non-Target issued cards. This move obviously limits usage of the new capabilities to a smaller user base, but that is probably just fine for the initial launch. Over time, the hope is that large retailers like Walmart, Target, and others can drive the industry towards a Cardholder Present or other similiar rate tier due to the additional fraud reduction these wallets often provide.

What Does It All Mean?

Overall, the Target Wallet launch is exactly what the retailer has been hinting at since the beginning of the year and follows a well-tested pattern for usage and interaction. For the time being, it has limitations in available payment methods and ultimate utility, but still forces further industry introspection as to if the OS based NFC wallets (Apple Pay, Android Pay, Samsung Pay) will ever really see the adoption that their Merchant based counter-parts achieve (Walmart, CVS, Target, Khols, Starbucks, Dunkin). After all, if the thing we all say is holding back mobile payment adoption is a reason to use them, then who is better to create that reason/value that the merchant you are shopping at?

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