Evan Schuman's StorefrontBacktalk

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.