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.
Will the MCX platform enable the retailers to have more control over customer information?
@hounhosp, you are right. This system will help the retialers to collect and analyse data about their own customers' shopping patterns. This will enable the retailer to reduce costs and increase profits.
The application will be available through virtually any smartphone.
@Alan, That means this doesn't use NFC at all. Do you think it involves QR codes somehow. Either one on the register that the phone scans or some kind of barcode on the phone that the register scans ?
@Alan, This clearely shows that the retail giants doesn't want to allow themselves to be dependent on Google Wallet to supply them with data about their own customers' shopping patterns. Companies like Wal-Mart have the ability to crunch the huge huge amounts of data it collects enables the retailer to reduce costs and increase profits. I think this is the right move by the retailers.
Google Wallet has about two dozen major retailers. I think only two companies work with both MCX and Google Wallet: CVS and Sunoco. All the others -- Target, Wal-Mart, Sears, etc. -- are going with MCX.
Isis has managed to line up a significant number of merchants, at least for the expected tests this summer in Austin and Salt Lake. And then there are the merchants working with PayPal and other ventures.
You clearly point out that the landscape is beginning to take shape. I fully agree that a consumer-driven payment system will result and that it will probably have better security than the online and alternatives. I further agree that the data is being collected in many non-transparent forms already, so that the increased exposure is probably minimal.
As to the players, this group has a big goal and certainly the size. I am thinking, however, that as you point out the fundamentals of transaction processing are going to be key, and you point out that they are creating service agreements with Google Wallets. So I question how successful the group will be in trying to create a parallel system when the core pieces are lining up with a more open system?
From a time standpoint, it's often just as fast -- if not faster -- to swipe a plastic credit card on the POS terminal. But as I've written in the past (and just commented to hounhosp), it's the added features that could convince people to use mobile payments, such as special discounts and additional loyalty points.
As for security, we already use paper and electronic coupons, everything from cutting out coupons from the newpaper circulars to coupons in the mail to coupons from Groupon, Living Social and other e-mail-based offers. And every time we use one of those plastic loyalty cards on our keychains or in our wallets, our data is collected.
Also, when paying via a phone, applications generally require a PIN. It's also possible to set a passcode (or photo recognition software) to completely lock the phone. Many phones also may be remotely wiped and/or tracked, which is impossible with a regular wallet.
In addition, credit card information is typically stored on the "secure" module in the NFC-enabled phone, which is difficult to crack. I think Google's new cloud-based Wallet system doesn't store credit card information on the phone.
So from these perspectives, mobile payments are significantly safer than a credit or debit card.
With Google Wallet, for example, Google collects a great deal of customer data and decides what type of data to share. Apple doesn't have a mobile payments platform, yet, but it will offer Passbook for iOS 6, which looks like it will be for mobile payments. Apple is notorious for not sharing much information with partners.
With MCX, though, the retailers -- Target, Wal-Mart, Sears, CVS, etc. -- are the rulers and they directly deal with their customers. So they can store all the customer information and use it for their own purposes, without violating state and Federal laws, of course. The MCX members still have to work with credit and debit card companies, but the members will have much greater control over the data than working with other mobile payment platforms.
No one will force customers of the retailers in MCX to use mobile payments. You could pay with cash or debit/credit cards. However, it would be smart for MCX to offer incentives, such as special discounts and loyalty points to use the system. I assume that's exactly what MCX members will do to encourage participation by consumers.
I have writen in the past that just paying with a phone isn't that useful. After all, it doesn't take any more time to swipe a credit card than to use a phone. In fact, it often takes more time to use a phone because you first have launch the mobile payments app and enter a PIN or passcode.
To a certain extent consumers already are bearing the cost of credit card theft and identity fraud through higher interest rates and fees. However, the problem could increase dramatically -- especially as much more customer information is collected -- if/when mobile payments take off in the U.S.
If the number of different mobile payments platforms increases, such as Google Wallet, Isis, MCX, etc., there will be even more locations where data is stored -- and could be stolen.
But do we really need new laws? There are plenty of laws governing such thefts. What would you suggest?
There are a variety of mobile payment options in the US, but most are in the beginning stages and don't have many users. Google Wallet has been around the longest, but it's on Sprint's NFC phones.
Isis, established by AT&T, T-Mobile and Verizon, haven't even begun beta testing in the two cities that are slated for this summer.
PayPal and all the others are still testing their offerings. Starbucks offers a mobile payment application and Dunkin' Donuts has just announced one (I'll probably write about that this Friday).
So, there's a lot of activity, but not many users and very few commercial launches. Because of this situation, the MCX certainly has an opportunity to establish itself. The MCX member companies are mostly retailers and they believe they know their customers much better than other third party mobile payments companies (PayPay, Google, Isis, etc.) and could offer more value. That's the idea, anyway.
The MCX said it would be adding other retailers so we'll see if that's true and, if so, which ones join.
The Googles, Apples are busy promoting their platforms and ads which MCX should make use off... So far, Apple doesn't have a mobile payment platform. Google has Wallet, but the MCX members want to create their create own platform, which is the reason for establishing that alliance.
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