Mega retailers Kroger and Walmart are interested in harnessing the coming power of the FedNow instant payments system to provide their customers with alternatives to the traditional card rails.

That’s according to industry professionals who heard representatives of the two giant store chains speak on a panel at the Faster Payments Council spring meeting in March in Kansas City. Speaking during that “Business End-Users Mega Use Cases” discussion were Walmart’s Matt Howarter and Kroger’s Kathy Hanna. 

Howarter is Walmart’s senior director of payments services and Hanna is Kroger’s vice president of payments acceptance and services, according to their LinkedIn profiles. A spokesperson for Bentonville, Arkansas-based Walmart declined to make Howarter available for an interview and didn’t comment further. Cincinnati-based Kroger didn’t respond to a request for comment. 

It’s fair to say that Kroger and Walmart’s representatives appeared enthusiastic about the possibilities of real-time payments, not just FedNow, but also the RTP network services already offered by The Clearing House, said Reed Luhtanen, the FPC’s executive director who was at the meeting.

FedNow is the new instant payments system being launched by the Federal Reserve banks in July after years of development. It would provide payments in seconds around-the-clock and on weekends and holidays. Such real-time payments systems are already available in more than a dozen other countries.

Peter Tapling, an industry consultant and FPC board advisory group member who was in attendance at the spring meeting, described the retailers' responses on the panel this way: “They expressed enthusiasm around the opportunities to enable instant payments at the point of sale.”

Nonetheless, he leavened that notion with the fact that the retailers have been scouring for alternatives to the card rails for years. “The merchants, writ large, have been trying to rid themselves of interchange forever,” said Tapling, whose firm PTap Advisory is in Chicago. 

Stephanie Martz, chief administrative officer and general counsel at the National Retail Federation, wasn’t at the FPC meeting, but she seconded retailers’ interests. They’d like to find a payment option that is “cheaper and faster than the payment rails that are currently available and we’re excited to work with the Fed to get that interface out the door as quickly as possible,” she said in an interview last week.

No one is suggesting FedNow will provide point-of-sale capabilities for retailers overnight. “Just because FedNow exists and by rule allows these things to happen, doesn’t mean that the financial institutions have built out these experiences for their customers,” Luhtanen stressed on the sidelines of another conference last month, Nacha’s Smarter Faster Payments Conference. It would have to work “the way the other payment types that Kroger and Walmart and other retailers implement at the point of sale, it’s got to be quick and easy and simple,” he explained.

Such real-time payments capabilities would be a benefit for the retailers not only at the point-of-sale for their consumers, but in relaying customer payments, such as refunds.

“Not having immediate refund capabilities for consumers is unacceptable,” Howarter said at the panel, according to a blog post from Luhtanen after the spring meeting. “Over 45 percent of calls to our call center are ‘Where is my refund?’ Faster payments present the perfect opportunity to be able to leverage the technology to improve that customer experience.”

In the post, Luhtanen went on to point out that Kroger and Walmart both said it is important “to get the user experience right” by being consistent, with some uniformity across merchants and with security for transactions.

Like other companies, merchants also expect faster payment systems will be a boon for business-to-business payments as well, allowing them to pay vendors and suppliers more expeditiously, Luhtanen said in the blog post.

By Lynne Marek on May 1, 2023
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