Why Walmart Needs a Cryptocurrency?

This article comes fromForbes, original author: Ron Shevlin

Odaily Translator |

Odaily Translator |

Just less than two months after Facebook launched the digital currency project Libra, documents disclosed by the US Patent and Trademark Office show that Wal-Mart has actually applied for a cryptocurrency patent, and it is expected that it will likely launch a stable currency linked to the US dollar.

• Sure enough, the news of Wal-Mart’s plan to issue coins immediately aroused heated discussions in the community. Many people are guessing what medicine the retail giant wants to sell in its gourd, such as:

• Is Walmart planning to compete with Facebook Libra?

• Will Walmart CEO Doug McMillon also defend his right to innovate before lawmakers in Congress?

• Oh by the way, Walmart still has more than 2 million employees worldwide, and if they all use "Walmart Coin" (let's call it that for now), it may be easy to launch the development of the emerging global encrypted economy.

Or, could Wal-Mart and Facebook join forces (or Wal-Mart buys Facebook)? In this way, cryptocurrencies can be easily popularized on the retail side.In fact, as early as a year agosomeone foresees

Wal-Mart will definitely enter the blockchain field, but people simply thought that Wal-Mart would only use blockchain technology in businesses such as tracking food and optimizing supply chains, and would not use self-issued encryption in its stores. Currency - but now it seems that this idea is clearly outdated.

So the question is, if Walmart does launch a cryptocurrency, what can they do? Let Mr. Odaily (WeChat: o-daily) analyze several possible application scenarios with you:

1. Become an ecosystem payment mechanism. According to a patent filing by Walmart, their proposed digital currency could be pegged to the U.S. dollar and only available at select retailers or partners. If "Walmart Coin" can be used in other potential implementation cases, it means that this digital currency can support free (or low-fee) payment transactions, or as a store of value. Consumers can use it at other retailers and, if necessary, clear it and convert it to cash;

2. Provide banking services to those who do not have bank accounts. According to the patent application information submitted by Walmart, they mentioned that many low-income families cannot access banking services because the cost of financial services from banks is high, so they need another way to deal with daily wealth and product needs, and "Walmart Coin" can meet this need;

3. "Eliminate" credit cards. One of the other potential innovative features of the "Walmart Coin" that has drawn attention, also according to the patent application information filed by Walmart, is its potential to eliminate the need for credit cards and even allow people to obtain a biometric-based (such as fingerprint or retinal) credit model. According to industry insiders, Wal-Mart mentioned in its patent that in the future, human beings themselves will become their own "bank credit cards" with digital value.

According to previous Bloomberg analysis articles, they believe that Wal-Mart seems to be considering whether to explore the cryptocurrency world in the same way as Facebook. But in fact, this is not the case. Even if Wal-Mart's patent application is approved, they should not launch a cryptocurrency similar to Facebook's Libra, and this has been confirmed by Wal-Mart spokesman Kory Lundberg. She wrote in an email reply:

"We do not currently have any plans for this patent."

Now, let’s go back to the original question: why does Walmart want cryptocurrency?

In addition to the three points mentioned above, after much deliberation, "Walmart Coin" may have other uses, including:

4. Pay wages. Walmart currently employs around 2 million workers worldwide, and paying them in cryptocurrencies seems unlikely. On the one hand, Walmart may need to spend a lot of money to readjust its salary system to support cryptocurrency payments; on the other hand, such a large number of employees will definitely encounter various problems when choosing different currencies to pay wages. However, the idea is not impossible, and the willingness of even a small percentage of Walmart employees to accept cryptocurrency payments for wages would appear to boost the nascent global crypto economy.

At this point in the analysis, if the above reasons are not valid, we guess that there may be two main reasons for Wal-Mart to issue cryptocurrencies: 1) to reduce payment fees; 2) to strengthen cross-border remittances.

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First, let's look at paying fees.

Walmart's sales revenue reached $515 billion in 2018, but they found through a survey study that 23% of the transactions in their grocery stores were actually completed on credit transactions (such as credit card swipes). In other words, some of Wal-Mart's sales will go to payment companies like Visa and Mastercard. Therefore, don’t underestimate the “Walmart Coin”. If this digital currency can be successfully released, it is expected to save Wal-Mart $2.3 billion in “handling fees” in the future, and immediately increase their profits by 22%.

The research report mentioned above is the "US Consumer Payment Study" (US Consumer Payment Study) released every year by TSYS, which mentioned that 23% of the transactions in grocery stores are credit cards, and 52% are debit cards ( The merchant pays the transaction fee for swiping the card). Additionally, the TSYS study found that 19 percent of department store transaction discounts were offered by credit cards and 45 percent by debit cards.According to Business Insider's 2014a report

Walmart paid as much as $3 billion in transaction fees in 2013, according to the report. Lee Scott, chairman and CEO of Wal-Mart at the time, stated that he would create a merchant customer exchange alliance (Merchant Customer Exchange) to suppress payment giants such as Visa, because their fees were too high. When asked about the future success of the Merchant Customer Transaction Alliance, Lee Scott replied with great exasperation:

Walmart is going to crack down on Visa and high payment processing fees, which is already written in their NDA.

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Next, let's see if Wal-Mart can use "Walmart Coin" to get a share of the cross-border remittance business.

Walmart has a longstanding relationship with MoneyGram, yes, you read that right, the same MoneyGram that Alibaba ultimately failed to acquire.

Charles Potts, a fintech analyst at Georgia Institute of Technology's Advanced Technology Development Center (ATDC), believes that cryptocurrencies can help Walmart bypass the Fed's Directo, as well as SWIFT and ACH. It is worth mentioning that some major US banks (such as Chase) have begun to explore the establishment of their own SWIFT alternatives, and some even have their own exchanges, aiming to eliminate the foreign exchange risk between the US dollar and other currencies. (Odaily Note: SWIFT, also known as: "Society for Worldwide Interbank Financial Telecommunication", is an international cooperation organization among international banks. It was established in 1973. At present, most banks in most countries in the world have used the SWIFT system.)

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Will Walmart's 'Walmart Coin' be as disruptive as Facebook's Libra?

Interestingly, Walmart’s launch of the “Walmart Coin” may not have been what crypto proponents imagined — that is, Walmart’s launch of the “Walmart Coin” wasn’t driven by technological disruption and a desire for decentralized currencies driven by.