Target (NYSE: TGT) recently launched a mobile payments platform by adding a "Wallet" feature to its app. In-store shoppers can now check out using the app, and redeem Cartwheel coupons and discounts by simply scanning a bar code.

Shoppers can also pay on Wallet with a Target REDcard, which either links to a bank account or store credit card and offers 5% back on purchases. Target plans to add support for gift cards in the near future.

The key facts

Target claims that its platform's main advantage is that it offers faster checkout times than traditional payment methods. It will also reduce costs by sidestepping traditional credit card processing fees with the REDcard.

That said, chain-specific mobile payments platforms are hardly innovative. Wal-Mart, CVS, and Kohl's have introduced similar platforms with the goals of reducing credit card transaction fees and keeping shoppers tethered to their data-gathering ecosystems with promotions and streamlined checkout solutions.

These platforms were introduced in response to two industrywide challenges -- the rise of Amazon, and the growth of Apple Pay and Android Pay -- which both carry the same swipe fees as credit card transactions.

The road ahead

Target still faces tough challenges ahead: Wal-Mart's ambitious e-commerce ecosystem expansion threatens its stores, and Amazon's takeover of Whole Foods casts a long shadow over its grocery business. But Target hopes to counter these threats by renovating its stores, opening more small-format stores in densely populated neighborhoods, and adding features to its mobile app.

Analysts expect that Target's revenue will rise 2% this year, but that its earnings will drop 9% due to increased outlays as it invests in its growth plans. Those numbers aren't impressive, but the stock remains fairly cheap at 15 times forward earnings, and its forward dividend yield of 4% is supported by a low payout ratio of 51% -- making it an interesting option for conservative income investors.

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*Stock Advisor returns as of December 4, 2017
The author(s) may have a position in any stocks mentioned.


Leo Sun has no position in any of the stocks mentioned.

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