Capital One Financial (COF -0.51%), the nation's seventh-largest bank, and retail giant Walmart (WMT 0.08%) announced an agreement last week to leverage both of their strong arms to capture greater market share in each of their respective segments. 

The companies are launching what they call a "digital-first" program that makes signup and shopping easy while offering customers a compelling rewards schedule. "Capital One and Walmart have combined our expertise to deliver a product that is in line with our shared passion of making customers' lives easier and more rewarding," said Daniel Mouadeb, senior vice president and head of Walmart partnership at Capital One. 

Young woman holding a smart phone and a credit card

Image source: Getty Images.

Some of the rewards the card offers are:

  • 5% back on all purchases.
  • 5% back on all in-store Walmart purchases for the first 12 months.
  • 2% back on restaurant and travel.
  • 1% back on everything else.

The digital-first part of the card means that customers can apply and get approved through their smartphones within minutes, so they can use the card as they're completing a purchase. If customers have Walmart Pay, the card can be stored in the app immediately. 

Why it works for Walmart

Walmart already sells about 20% of all groceries in the U.S., but Amazon is chipping, or maybe hacking, away at the grocery market. At this point, online grocery shopping is still in its infancy -- it only amounts to 2% of total supermarket shopping. 

Amazon has made several attempts to break open online groceries, its most recent attempt being the buyout of Whole Foods. It will also introduce Amazon Go supermarkets, where customers log in and don't need to wait in checkout lines, within the next two years. It currently offers a Visa credit card that gives 5% back on Amazon orders as well as other rewards. 

Walmart already has a credit card rewards program as well, but this one knocks its socks off, and Walmart needs to keep pace so as not to lose its competitive market share. However, investors aren't worried about Walmart, now the third-largest online retailer behind Amazon and eBay and one of the most resilient consumer staples stocks on the market. Building its online presence is only more good news. 

Where Capital One stands 

Capital One has had an interesting year. The company's first-quarter results in April were very positive, with high revenue and earnings per share (EPS) that beat expectations and its stock price surged. 

In July, though, the company announced a huge data breach that left more than 100 million customers' information compromised, and share price slipped from over $100 to $85. It will be expected to pay somewhere between $100 million and $150 million in 2019 in legal fees and related costs, which will dilute their revenues and EPS. 

However, large data breaches have happened before to other large companies such as Target and Home Depot, and they quickly bounced back. A new chapter in Capital One's story helps the company move past the July debacle, picking itself up off the floor to open a fresh page that highlights its commitment and dedication to plowing forward, seeking innovation, and improving its relationship with its customers. The company also stands to greatly benefit from Walmart's powerful market share and high sales volume, which keeps increasing annually, topping $514 billion in 2018.

The new card is set to roll out on September 24, with both Walmart and Capital One anticipating greater sales.