Walmart in Talks to Move Credit-Card Partnership to Capital One
July 12 2018 - 03:33PM
Dow Jones News
By AnnaMaria Andriotis and Liz Hoffman
Walmart Inc. is talking to Capital One Financial Corp. about
taking over its store credit card, according to people familiar
with the matter.
The discussions, which are expected to wrap up in coming weeks,
could end Synchrony Financial's nearly 20-year run as the exclusive
issuer of Walmart cards.
Synchrony has been Walmart's exclusive credit-card issuer since
1999 and counts the partnership as one of its five biggest by
revenue. Synchrony issues both a private-label card, which can only
be used at Walmart's stores and website, and a co-branded card that
is accepted almost everywhere.
This is the first time Walmart launched a formal request for
bids from other card issuers, people familiar with the matter said.
The retailer met earlier this year with executives from Capital One
and Goldman Sachs Group Inc., which has been exploring its own
entry into credit cards, according to people familiar with the
matter.
One option that Walmart has looked at is whether to keep its
credit card that can only be used at its stores with Synchrony and
move the co-branded card to Capital One, people familiar with the
discussions said. Walmart's talks with Capital One were previously
reported by Bloomberg News.
Losing Walmart would be a blow to Synchrony, which counts the
retail giant among its five largest accounts. Walmart credit-card
balances total around $10 billion, according to a person familiar
with the matter, accounting for 19% of Synchrony's retail card
balances and 13% of its total balances, which also include retail
installment loans and medical loans.
Capital One and Synchrony declined to comment. Walmart wasn't
immediately available for comment.
Walmart and Synchrony have encountered challenges on several
fronts of late. Synchrony executives have expressed frustration
that Walmart isn't putting enough marketing muscle behind the cards
and wants more in-store promotion, people familiar with the matter
said.
Walmart executives believe Synchrony is keeping too much of the
cards' revenue, the people said. The executives aired those
concerns in a meeting with Synchrony's board last year, one person
said.
The retailer also wants Synchrony to approve a higher percentage
of applicants, the people said. Walmart recently partnered with
fintech startup Affirm Inc. to offer installment loans to some
shoppers as an alternative to credit cards.
Facing intense competition from Amazon.com Inc., Walmart has
been investing in self-checkout and mobile payments, pushing
customers toward its own digital wallet, Walmart Pay. It sees
Capital One as a more tech-forward partner whose broader banking
capabilities could aid Walmart's digital ambitions, some of the
people said.
Walmart executives, meanwhile, have been speaking with
executives who run Amazon.com's credit-card program as they weigh
whether to move to a model similar to Amazon's, which has two
issuers for its consumer credit cards.
Synchrony's shares are down 11% this year amid rising loan
losses and myriad challenges facing traditional retailers,
including declining health of brick-and-mortar stores. Synchrony
recently lost Toys "R" Us, a high-profile store partner, to
bankruptcy.
There have been other challenging spots in Walmart's
relationship with Synchrony. Less than 5% of Walmart sales are made
on Walmart credit cards, a person familiar with the matter said.
That is well below the 40% of retail sales that store cards
typically account for, according to analysts.
Separately, Walmart has been talking to banks about potentially
launching a separate credit card for consumers who shop at its
e-commerce subsidiary, Jet.com, people familiar with the matter
said.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and
Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
July 12, 2018 15:18 ET (19:18 GMT)
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