Wal-Mart MoneyCard Break-In Offers Lessons For New Payment Tactics

As retailers accelerate payment experiments, a recent Wal-Mart experience with a well-established approach offers a cautionary tale. A Buffalo, N.Y., woman this month walked into her local Wal-Mart, gave an associate $1,000 in cash and asked for it to be loaded onto a Walmart MoneyCard, in preparation for a vacation. A couple days later, the customer discovered that the money had been removed by a thief in another country.

The fact that it was a thief who stole the funds is undisputed. However, the immediate next actions of Wal-Mart and Green Dot—which manages MoneyCard for Wal-Mart—is a textbook example not of what should not be done, but how it shouldn't be done.

The difference between how and what, in this case, is the difference between perception and reality. All participants seemed to have acted properly, but few considered how the experience feels to customers. As a result, a bad situation mushroomed into something even worse. The first problem came when this customer, Tammi Cote, walked into the Wal-Mart where she had brought the $1,000 in cash, went to the associate she had worked with and sought help. The store said it was not its problem and referred the customer to Green Dot.

From a legal and business perspective, that is absolutely correct. If a customer has a problem with her Costco-branded American Express card, for example, no one bats an eye in sending that customer to Amex. But there is something wonderfully personal about bringing in a pile of greenbacks and handing it to an associate.

The timing made things worse. The theft happened within 30 minutes of the woman leaving the Wal-Mart. Officially, that makes no difference in determining jurisdiction. But from a customer-relationship standpoint, it feels very different.

What if the theft occurred 30 seconds after the transaction and the customer discovered it—via her smartphone—while still standing in the store, with the pile of money still in the hands of the associate? Yes, it's still a Green Dot issue, but it won't feel that way. Retailers have to factor that reality into their processes. Maybe they should act as more of a go-between?

Back to Buffalo. On the phone with Green Dot, Green Dot's customer service declined initially to return—technically, reimburse—Ms. Cote's money. Why? Seems that her experience—the cash, the vacation, the timing—sounded similar to some con-artist scams that have become popular. There was no suspicion that the woman was in on the scam, but Green Dot needed to verify that she hadn't been a victim who helped her attacker.

Again, why? Because Green Dot's policy is to only reimburse for fraud losses if the customer victim hasn't helped. For example, if the customer had been tricked into revealing a PIN and other account details to a con artist, she would not be reimbursed. (Note: After local media coverage intensified, Green Dot did return the money.)

Here again, the policy has a legitimate foundation, back in the boardroom. Customers must know that they cannot give out their PIN or account details. The best way to make that point is to state that doing so will negate your protections.That's fine. But you're talking about someone who trusted a local Wal-Mart with money and got ripped off by an overseas thief, and then found out that the company wants to make an example of her. Note that it's not clear that this woman—in any way—did help her attacker, but the process does not seem like one to engender warm feelings.

(Note: When the media coverage happened, Green Dot was mentioned as an afterthought. The headlines spoke of a Wal-Mart customer getting ripped off after she entrusted Wal-Mart with her money. You can outsource the processing, but you can never outsource the blame.)

This situation gets worse. On the Wal-Mart site, there's an FAQ to help convince customers to use and to trust the Walmart MoneyCard. Remember, this wording is aimed at prospective customers who may be nervous about trying a new payment product. When the Wal-Mart FAQ asked, "What if someone steals my Card or uses it without my permission?" here's what the site told prospects: "You should treat your Card as if it were cash. Guard the account number the same way you would cash or any credit card. Do not share your Card number with anyone. If you lose your Card or believe it to be stolen, please click here to report it lost/stolen. We will cancel your old Card, transfer the remaining balance to a new Card and then mail it out to you at the address on file. Fees may apply."

Let's look at that last part again: If there's a theft that is not your fault, Mr. Customer, "we will cancel your old Card, transfer the remaining balance to a new Card and then mail it out to you at the address on file. Fees may apply." Note how it skips over mention of the funds that were stolen. It seems to just write that part off, focusing only on transferring whatever breadcrumbs the thieves left behind.

And for good measure, it adds "Fees may apply." For the victim. A victim, because your retail system—or your card processor's system—was breached. Want to bet that neither the person who wrote that section nor whoever approved it was on commission?

Turns out that the "Fees may apply" language references a charge for overnight delivery of the card. Two thoughts. First, why bring that up? If you want to send it through regular mail, do that. If the customer asks for it to be accelerated, that's when you can bring up any additional charges.

Second thought, though. Wal-Mart will waive shipping charges on regular online merchandise but not for a victim of its side's security hole?

To be clear, it appears that everything ultimately happened according to proper procedure. The customer eventually did get her money back. And Green Dot now says the FAQ on Wal-Mart's site will be changed.

But as chains explore a wide range of different payment options, it might be a smart idea to also explore new customer-service processes to go with those new payment vehicles. It's not enough that the new payment mechanisms work. Your shoppers have to be comfortable with them.