Dive Brief:

• Retail behemoth Walmart said it’s locking arms with mega payments processor Fiserv to let consumers make real-time payments directly from their bank accounts to pay for online purchases, potentially disintermediating credit card use.
• “We expect this new option for real-time consumer payments will further help provide shoppers with even greater choice in paying online,” a Walmart spokesperson said by email, noting that the company is “pleased to bring the option of real-time payments forward in retail.”
• The new service, expected to launch next year, may tap the two U.S. real-time payment systems to make the instant payments happen, including the Federal Reserve’s FedNow offering as well as The Clearing House’s RTP network, according to an earlier report Thursday from the media outlet Bloomberg.

Dive Insight:

Walmart and other retailers have been seeking for years to reduce their customers’ reliance on credit card use because bank card issuers and the card networks that route the transactions charge anywhere from 2% to 5% to process credit card transactions.

“We’re proud to offer our customers greater choice in how to pay — and pleased to bring the option of real-time payments forward in retail,” the Walmart spokesperson said.

In June, the company began offering customers a pay-by-bank option online that also lets customers bypass credit card use by paying debiting directly from their bank accounts. The retailer has been using ACH payments, the spokesperson said. Such payments typically take about one to three days to settle so a real-time payment would be much faster.

“This is an extension of Walmart’s Pay by Bank solution launched earlier this year, which allows customers to link their bank account to their Walmart Wallet to pay for orders,” the Walmart spokesperson said.

As part of Walmart’s testing, the retailer used Fiserv’s proprietary real-time rail, called Fiserv NOW, to make a real-time transaction happen. “This was the first such transaction over real-time rails for Walmart,” a Fiserv spokesperson said by email. “That transaction was a proof-of-concept, and the full service will roll out in the future.” Those future options may include routing payments over FedNow and RTP, the spokesperson said.

Matt Howarter, senior director of payments services at Walmart, spoke earlier this year during a Payments Dive event about the retailer’s interest in tapping real-time systems for payments once standards were in place.

Real-time payments could improve payments for consumers, especially those who live paycheck-to-paycheck, Howarter said in April. For instance, real-time rails could be used to provide faster refunds. “We’re really excited about the promise of being able to give customers access to their funds sooner,” he said.

Walmart’s vice president of emerging payments, Jamie Henry, made that point in the Bloomberg report as well. “When the transaction processes as a real time payment, customers get immediate access to see that payment come through, I see it hit my account and I can properly budget,” Henry said. “It’s not as if I’ve got this phantom payment out there that’s going to take place a couple days down the road.”

Eventually, there could be real-time payments incentives that emerge to shift consumer behavior in the direction of that payment type too, Howarter noted in the April panel discussion.

“The end result is credit is not going to go away,” Howarter predicted. “But I think there’s definitely a potential of it disrupting the market.”

Aside from consumer use cases, Walmart also stands to benefit from being able to use real-time rails for business-to-business transactions, Howarter said.

While the FedNow and RTP systems aren’t interoperable, creating a disconnect for banks routing account transfers, Fiserv may act as a conduit between banks seeking to transfer to counterparts that may not be connected to one system or the other.

“We are incredibly proud to partner with Walmart on this real-time milestone and look forward to collaborating together on the future of commerce,” Fiserv’s head of global e-commerce, Casey Klyszeiko, said in an emailed statement.

The Federal Reserve, which launched FedNow last year, has been trying to build bank adoption of the system, but at this point is connected to only about 1,000 of the 8,000 U.S. banks and credit units it aims to reach. The RTP network, started in 2017, has experienced increased adoption since the launch of FedNow and reaches about 724 financial institutions, including most of the biggest in the U.S.