The relationship that made Capital One the exclusive issuer of Walmart credit cards officially ended last Friday. The partnership began 2018, with Capital One becoming the exclusive issuer in 2019.
The breakup seemed inevitable ever since Walmart filed a suit against Capital One in April 2023. The retail giant alleged various breaches of the partnership contract, including delays in posting transactions to cardholders’ accounts and failures to promptly replace lost cards. This March, a judge ruled that Capital One had not provided the requisite level of customer service it had agreed to, giving Walmart the right to end the partnership.
According to a statement Capital One issued earlier this month, the bank “ended the agreement that made Capital One the exclusive issuer of Walmart Consumer Credit Cards.” The key word is “exclusive issuer,” so the announcement does not necessarily mean that Capital One will no longer issue co-branded cards with Walmart. The statement also indicates that Capital One will retain ownership and servicing, with a further announcement expected in several months.
“It will be interesting to see Walmart’s next steps,” said Brian Riley, Director of Credit & Co-Head of Payments at Javelin Strategy & Research. “They have been experimenting with their fintech, One, and are also doing buy now, pay later. Partnering has proven to be challenging, not just with Capital One, but also their prior partner, Synchrony.”
Walmart’s two-decade relationship with Synchrony Financial also ended in a hailstorm of lawsuits. Walmart sued Synchrony for $800 million in 2019, claiming the company was refusing to underwrite weak credit card accounts. The suit was later dropped, but the relationship was severed. Synchrony did manage to keep its status as the issuer for the Walmart subsidiary Sam’s Club.
Walmart’s Future Options
Where does Walmart go now? There are a few alternatives.
Walmart may begin a relationship with another issuer, though some issuers may hesitate to build a co-branded partnership after the retailer’s second terminated relationship. However, with approximately 255 million customers and members visiting Walmart stores each week, the relationship will be appealing to many issuers.
Walmart may also turn to its majority-owned fintech, One. If this change occurs, the company must decide which firm would bear the risk on their balance sheet.
“Decades ago, retailers often supported their credit card receivables, but when the economy went into a downturn, balance sheet stress usually required the firm to sell the receivables,” Riley said. “However, the retailer’s recent movement to BNPL may indicate that they are willing to add some balance sheet risk.”
A third option would be for Walmart and Capital One to repair their relationship, though this is unlikely, given the litigation.