Some of the largest retailers in the United States have established a mobile payments group, the Merchant Customer Exchange (MCX). My view: The retailers want to their its hands on more customer data and will further muddy the already confusing mobile payment waters.
The Wall Street Journal broke the story today, but the publication first reported it in March without many details. There still aren't many details, but the group's members include Best Buy Co., Darden Restaurants Inc. (which owns Olive Garden and Red Lobster), Lowe's Cos., Royal Dutch Shell, Sears Holdings Corp., 7-Eleven Inc., Target Corp., Sunoco Inc., CVS Pharmacy, and Wal-Mart Stores Inc. The 15 member companies generate about $1 trillion of combined revenue and serve almost everyone who has a smartphone in the US, MSX says.
The MCX's barebones Website says other merchants and additional details will be announced "in the weeks and months ahead."
Why was the group established? Its Website says:
[The MCX was formed] with a singular purpose: offering consumers a customer-focused, versatile and seamlessly integrated mobile-commerce platform.
Development of the mobile application is underway, with an initial focus on a flexible solution that will offer merchants a customizable platform with the features and functionality needed to best meet consumers' needs. The application will be available through virtually any smartphone.
That doesn't say much!
I assume the group was established because its members have looked at competing mobile payments initiatives, such as Google Wallet and Isis, and they believe they can do better for themselves and their customers. The companies want to obtain as much customer information as possible without having to beg Google Wallet, Isis, and other mobile payment ventures for the crumbs of data they might deign to share. Also, the enormous purchasing power of MCX members might enable them to cut better deals with transaction processors, such as MasterCard and Visa, than going through the mobile payment initiatives.
For consumers, MCX members might be able to provide special deals, discounts, loyalty points, and other services, and it might be easier to integrate these offerings without working with other mobile payment firms.
However, mobile payments are complicated, and this group might face the same problems as the other initiatives, which are not standing still. Look at what happened in just the past five months:
Starbucks said it will invest $25 million in Square and use the mobile payments company for processing credit and debit cards.
Google said its Wallet service will employ cloud services to allow the use of credit cards from American Express, Discover, MasterCard, and Visa on almost any smartphone that has near field communication.
PayPal, which is beta testing PayPal Here mobile payments, purchased card.io, which lets users purchase items by snapping a photo of their credit or debit card with their phone camera. PayPal also unveiled a credit and debit card reader (similar to Square's product) that's inserted into a mobile device's audio port.
Intuit, whose recently launched GoPayment product is similar to Square's plastic card reader for smartphones and tablets, said it is integrating its QuickBooks Point of Sale software into POS systems for mobile phone payments.
MasterCard unveiled the PayPass Wallet Services digital platform for online, in-store, and wireless purchases.
VeriFone Systems introduced SAIL, a smartphone and tablet card reader that is similar to Square's product.
So the MCX is just one of many mobile payment ventures. Yes, the group is unique because it's composed of major retailers. But it still has to work with all the other companies that are vital to mobile payments: transaction processors, credit/debit card companies, POS manufacturers, cellular operators, and software developers. All these ventures take a long time to even begin beta testing.
I assume the new group will begin testing its mobile payment platform late this year or early next year, but even if it's successful, it won't be released commercially until late in 2013.
I might be a little more optimistic than you about the MCX retailers being able to offer reliable and secure mobile payments. These are huge companies that already have implemented advanced POS systems. Adding mobile is a complication, but it's not that difficult.
The difficulty is in creating a system that works smoothly and across all the member merchants. As I've written in some comments and a video, it's a challenge for Google Wallet to work all the time -- which it doesn't.
As for worldwide implementation, that will take more time, of course. One step at a time.
Retailers know a lot about retail, but I'm not all that sanguine that they know much about the technology to implement mobile payment systems reliably and securely. (Heck, they can't even use "singular" correctly in their press release.)
If the result is one system where the merchants hold all the data, and another system where the vendors hold all of it, that's not going to go over well.
And how is this going to work worldwide when different countries have different policies on collecting and sharing customer data?
Okay. No problem. This is what capitalism is about, to try to come up with new and better ideas. I hope the MCX does well for the retailers and consumers.
I did not get the idea that you were blaming them, I was just pointing out that the "invisible hand" of the free market system had given the Big Retailers some ideas.
I'm not blaming the merchants for creating the Merchant Customer Exchange. Perhaps it will work out well for the members and consumers. But I side more with consumers, and it's important to realize that regardless of how the MCX portrays its vision in the press, the vision is to generate more revenues, which entails capturing more customer data.
Also, the MCX will lead to more "fragmentation" of the US mobile payments market. I assume that if Americans accept and enthusiastically use mobile payments, the various systems eventually will sort themselves out. But for the next year or two, it will be confusing for everyone.
As you said, the big retailers may want to cut their costs as well as leverage their collective strengths to give themselves some potential competitive edge - and who can blame them?
I sometimes read Bruce Schneier's blog, but not regularly. I know he's a well known security expert and I've interviewed him a couple of times for ThinkerNET.
Companies already can be sued for security problems. However, perhaps, as Schneier seems to say, there needs to be a law specific targeting the problems of software security.
As for locking down computers, many companies do that.
It remains to be seen what problems crop up with mobile payments and whether NFC is easily hacked. Mobile phones in general are more secure than computer, although certainly there is plenty of malware, especially for Android. Still, cellphone malware hasn't been a major problem in the U.S.
Also, mobile payment companies are well aware of the possibilities of security problems. Mobile payment apps typically require a PIN or passcode to run.
"IMHO" until those who are able to effect correction are held responsible for their work there won't be any progress in Computer Security
It is critical to recognize we need two type of computers: commercial and experimental. A commercial computer should be locked and secured so it can be used for business transactions while an experimental computer should be open so those desiring can play with them. The change is that "those desiring" play with their owen computer -- rather than yours and mine -- as is the case today
I read that. The MCX isn't saying what technology it will use, but people have assumed that because of that statement, it might not be NFC. Maybe, but it's premature to assume. I don't know what technology or technologies will be employed.
We'll have to see whether MCX makes sense. There are so many different mobile payment initiatives that it's difficult to determine which, if any, will succeed.
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