What Value Could a Walmart Cryptocurrency Have? — Market Mad House
By: Daniel G. Jennings
Tags: Payments, Walmart, Cryptocurrency, Stable Coin, Fintech

Strangely, Walmart (NYSE: WMT) could be one of Facebook’s (NASDAQ: FB) rivals in the race to commercialize corporate cryptocurrency and stablecoins.

In fact, Walmart has applied for a patent for what looks like a stablecoin, Bloomberg reports. To explain, U.S. Patent Application 20190236564 is for a blockchain application for “saving if the one digital currency unit is unrestricted; and storing the one digital currency into a digital currency reserve.”

Today’s stablecoins like Tether (USDT) contain a smart contract; or digital robot, linked to a trust account. To elaborate, the smart contract releases fiat currency when you spend a stablecoin. The Gemini Dollar (GUSD); for example, releases $1 from a trust account at the State Street Corp (NYSE: STT) bank in Boston.

Why is Walmart researching a Stablecoin?

I think stablecoins are a more advanced payment mechanism rather than a true cryptocurrency. Therefore, I think Walmart is trying to develop a better payment application for fiat currency rather than an altcoin.

Theoretically, a blockchain is more secure and less prone to error than existing electronic payment systems. In particular, blockchain payments could be easier to track and store.

Moreover, Walmart could create a totally digital payment solution. In theory, Walmart could replace cash registers and cashiers with apps. Thus, Walmart could reduce labor costs, staff, and infrastructure expenses.

Walmart, could for example, build stores without cash registers or reduce the number of cash registers. Instead of going to the register, customers could pay for their merchandise with Walmart Pay.

Will Walmart add Blockchain to Walmart Pay?

Notably, Walmart already offers a popular payment app Walmart Pay. Moreover, pymts.com estimates 5.9% of American smartphone users used Walmart Pay in December 2017.

Walmart Pay could have 14.672 million users in the United States if Pymnts.com’s claim is true. To clarify, Statista estimates there are 248.68 million smartphone users in the United States in 2019.

I suspect the real purpose of Patent Application 20190236564 is to improve Walmart Pay. Interestingly, Walmart Pay is a quick read (QR) code payment solution.

QR Code apps communicate with a point-of-sale (POS) device by taking a picture of a barcode with a smartphone’s camera. The QR Code tells Walmart Pay to connect to a customer’s bank or credit card account and take payment.

In contrast, near field communications (NFC) apps like Apple Pay and Google Pay communicate with cash registers via a wireless signal. Additionally, NFC apps connect directly to a retailer’s payment system.

Thus, NFC apps create two security risks Walmart could want to avoid. First, crooks can intercept wireless signals and steal data. Second, NFC apps give the payment app, and anybody who hacks it, access to a retailer’s payment system.

However, a QR Code app uses no wireless signal and only sends a payment. Thus, the payment app gets no direct access to Walmart’s payment system. Notably, Walmart is among many big American retailers that refuse to accept Apple Pay and Google Pay. My suspicion is that Walmart fears NFC payment apps as a security risk.

Will Walmart Accept Stablecoins?

An intriguing possibility is that Walmart plans to accept stablecoins in Walmart Pay and in its stores.

Therefore, Walmart may not be planning its own cryptocurrency. Instead, Walmart could accept other companies’ stablecoins or cryptocurrencies. Walmart, could accept Libra in its store for instance.

A likely possibility is that Walmart is gearing up for stablecoins offered or supported by big banks. Both Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) are reportedly researching the possibility of issuing stablecoins. Moreover, State Street is supporting the Winklevoss Twins’ Gemini Dollar, Market Mad House claims.

Thus, Walmart is probably researching a potential payment technology rather than planning a cryptocurrency. Personally, I can see little advantage to Walmart issuing its own cryptocurrency. I suspect most Walmart customers could refuse to use a Walmart coin.

Could Walmart Issue a Stablecoin?

A Walmart stablecoin, on the other hand, makes more sense in my mind.

To clarify, I think customers will accept a Walmart stablecoin because the transaction will involve a fiat currency rather than an altcoin. The Walmart Coin could release a dollar from Walmart’s bank account for instance.

In fact, it could be possible to build an app that lets customers use stablecoins without releasing they are using altcoins or the blockchain. Instead, of scary sounding digital construct Walmart will offer a faster, more reliable, more convenient, and more secure payment system.

Grandmother will never consider buying a Bitcoin (BTC). However, grandmother will use Walmart Pay because it makes her shopping trip faster. Popular payment apps like PayPal (NASDAQ: PYPL), Apple Pay, and WeChat Pay show that ordinary people will use digital payment; if it is fast, secure, convenient, and connected to traditional financial institutions like banks or credit cards.

How Walmart could use Stablecoins in Financial Services

Furthermore, stablecoins could make cross-border payments, foreign exchange, money orders, remittances and money transfers faster and cheaper.

Walmart is already a major player in consumer financial services offering credit cards, remittances, reloadable debit cards, check chasing, installment financing, money orders, bill pay, and international money transfers in its Money Centers.

Thus, Walmart has a strong incentive to reduce the expense of transferring and wiring money. An obvious way to cut the expense of transferring money and reduce risks is to have digital robots do all work in the blockchain.

Replacing human Money Center associates with digital robots will reduce labor costs. In addition, digital robots will reduce security risks because they will be less likely to steal money or make mistakes.

How Walmart can expand its Financial Services with Digital Robots

Currently, Walmart is testing physical robots and management by artificial intelligence in its stores. In particular, Fox Business claims robots helped Walmart’s earnings to beat analysts’ expectations on 19 August 2019.

Given those results, I think financial services delivered by digital robots will be the next logical step at Walmart. One reason for Walmart to use digital robots is to expand the number of financial services it can offer. Another rational for digital financial services is to offer financial services at more locations.

For instance, Walmart could install kiosks that provide a wide variety of financial services in stores. The kiosks could replace the Walmart Money Center and cut Walmart’s labor costs.

Eliminating financial services employees is a long-term trend at Walmart. Back in 2016, Walmart eliminated 7,000 accounting jobs by deploying cash counting machines and new software, Market Mad House reports.

Is Walmart a Good Investment for Financial Technology?

Given this news, investors will ask if Walmart (NYSE: WMT) is a good investment for financial services and fintech? I think the answer is yes because of Walmart’s huge profits and revenues.

Impressively, Walmart reported a quarterly gross profit of $32.454 billion on quarterly revenues of $130.377 billion on 31 July 2019. Impressively, those numbers grew from $30.891 billion in revenues and $30.891 billion in gross profit on 30 April 2019.

Stockrow estimates Walmart’s revenue growth for the quarter ending in July2019 at 1.86%. Yet Walmart runs a lot of cash through its till despite the low revenue growth. Walmart reported an operating cash flow of $11.185 billion for the quarter ending on 31 July 2019.

Is Walmart Investigating Stablecoins for Money Handling?

The cost of handling all that money is huge. Thus, one reason Walmart is investigating stablecoins and blockchains is to reduce money handling costs.

There are 4,769 Walmart stores in the United States and 11,766 Walmart stores worldwide, Statista estimates. Thus Walmart could save tens of millions of dollars a year by cutting money-handling expenses by just 5% or 10%.

Consequently, the Coin Price and Market Capitalization of a Walmart stablecoin could be high because of all that cash. To explain, I think the sheer volume of business Walmart does will inflate a stablecoin Coin Price.

Finally, Walmart could develop money-handling solutions it can sell or license to other retailers. Thus, money handling could go from an expense to a profit center at Walmart.

Walmart is a Good Growth and Dividend Stock

Given the possibilities of blockchain, I think Walmart is a good growth and dividend stock. Walmart is a nice growth stock because it is exploring new technologies which can reduce new costs and drive more business.

Thus, I think Mr. Market fairly priced Walmart at $111.91 a share on 22 August 2019. One reason, why I call Walmart a good growth stock is its excellent dividend.

Dividend.com credited Walmart (NYSE: WMT) with 44 years of dividend growth, a dividend yield of 1.89%, an annualized payout of $2.12, and a payout ratio of 44.% on 22 August 2019.

For the record Walmart paid a 53₵ dividend on August 8, 2019. That dividend grew by 1₵ in 2019, rising from 52₵.

If you are looking for a retail and fintech stock with growth potential and a growing dividend Walmart is worth investigating. In the final analysis, I think Walmart could make money from the blockchain.