MCX: The Future of Mobile Payments

Aug 16, 2012

It’s a foregone conclusion that mobile payments are going to be a big part of the future of retailing and consumers have a growing number of options when it comes to paying for purchases using smartphones.

Now comes word that a group of major retail chains have joined together to form Merchant Customer Exchange (MCX), a new company focused on developing a mobile payment experience that also allows merchants to customize offers based on the consumer.

Chains currently involved in MCX include 7-Eleven, Alon Brands, Best Buy, CVS, Darden Restaurants, HMSHost, Hy-Vee, Lowe’s, Publix, Sears Holdings, Shell Oil, Sunoco, Target and Walmart. Others are expected to join in the months ahead.

"As merchants, no one understands our customers’ shopping and payment experience better than we do, and we’re confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient," said Mark Williams, president of financial services, Best Buy.

"These big retailers are doing this because they are not happy with the solutions being pushed on them by the market," Rick Oglesby, a payments expert at Aite Group, told Reuters. "A system designed by merchants for merchants could have a big leg up over the competition."

Discussion Questions: What will the creation of MCX mean for the development of the mobile payment industry? How do you think MCX will affect smaller merchants relative to mobile payments?

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21 Comments on "MCX: The Future of Mobile Payments"

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Lisa Bradner
Lisa Bradner
5 years 6 days ago

The basic premise — understanding how the shopper wants the experience to work and delivering custom offers and content — is sound. The part I’m not getting — obviously competitive retailers in a category can’t be in the same system. If I’m CVS, I don’t want Walgreens to be able to access the same data and know what customers are buying from me and then base their offers on that data.

There are going to have to be some very tight rules on data governance and data sharing. If the thought is “we’ll tie shoppers to our brand by getting them into our mobile payment system and steal share from our competitors” then it is, in my opinion, another walled garden experience that will fail to deliver what shoppers want.

Ed Dunn
5 years 6 days ago

The major takeaway from this announcement is the clear rebuke of other mobile payment efforts by banks, payment processors, telcos and technology firms that clearly did not put the merchant first in their implementation.

It was always my position the retailers are holding the trump card in the mobile payment landscape. It’s too early to tell and not enough information is there for me to know about MCX, but the one thing I do know is Google, ISIS and others may want to re-think their approach.

Max Goldberg

MCX will give a boost to mobile payment systems. But it could also serve to confuse consumers. There needs to be consolidation within mobile payment options. Consumers do not want to walk into a store and have to figure out which mobile payment application(s) are accepted. That would be a non-starter. Until there is uniformity mobile payments will not become widely used.

Mark Heckman

Converting Visa, Mastercard, and Amex users to other forms of payment will take time. The incumbents have invested heavily over the years to create loyalty, stability, and reasonable levels of security. They will not give up share without a fight.

However, with the advent of (MCX) there is no doubt in my mind that the “bandwagon” they have started will attract attention, particularly with the mid-tier and smaller retailers who are looking for any means of savings they can garner to remain competitive with the bigger players.

High credit and debit transaction fees are clearly one of the most ubiquitous and significant expense problems retailers have. They are motivated to support a less expensive alternative, whether it be mobile or otherwise.

Ken Lonyai

There are a bunch of well funded initiatives regarding mobile payments and each one makes their case as to why theirs is the best and most likely to succeed. Time will tell. No one today can predict with any certainty what will be the dominant solution or if there will be one clear winner. By rights, Diners Club or AmEx should have been the dominant credit cards, but Visa/MC outdid them. In fact, today’s vision of mobile payment may be dated in say 5 years as mobile proliferates, consumers get used to alternative payment forms, and start-ups keep pushing the envelope with new ideas. One thing is for certain: the old ways of payment/commerce are being disrupted and the disruption will continue for many years, if not indefinitely.

Ben Ball

This is a (perhaps knee jerk) reaction to the current swipe fee argument. It has little to do with “the customer experience.” My customer experience getting cash back on my MC/Visa/Amex purchases is just fine, thank you. And I am not limited to where I can spend that cash.

For this effort to be successful, these retailers are going to have to build a payment processing infrastructure (or pay to “lease” one). That may be doable, but then they are going to have to agree on policy and procedure regarding revenue/cost share, customer data sharing (Lisa Bradner’s point) and a host of other issues.

It’s going to be a long and winding road.

Paula Rosenblum

Oh, this is all about cutting fees. It’s not about “solutions.” It’s all about the Benjamins. The fascinating part of it is there are at least 5 different mobile payment players floating around at the moment, included TWO separate retail-driven initiatives (NRF just announced their own earlier this week – the IMI).

I don’t believe merchants can do a better job at payment exchanges than payment exchanges. We’re retailers for goodness sake. And at this point, I don’t see NFC as the big differentiator. I think it’s more about software.

What this means for the mobile payment industry is that it’s going to move really, really fast. And when the dust settles, there will be a lot of “Betamax” vendors and one or two VCRs. Square’s a keeper unless Starbucks takes it out of play for the small retailer. PayPal is also a keeper, but more expensive. Apple is coming on strong. The rest? I have no idea which ones will be like 8-track tapes and which ones will be the new iPod (I’m having a day of mixed metaphors!).

Nikki Baird

I think it reflects the growing importance of solving the myriad challenges that have held back mobile payment adoption all along. But I don’t think it addresses significant chunks of those challenges — like getting carriers, banks, handset and POS hardware manufacturers, retailers, AND consumers to all play well together.

That said, I am glad to see that retailers are finally taking more than a passive interest in the future of mobile payments. The last time RSR touched on the topic, in 2009, we were surprised to find that almost no retailers were participating in any of the working groups on the topic — they were letting banks and tech companies define the customer experience. At least now they’re trying much harder. Is establishing a separate effort — multiplying the number of groups out there trying to solve these problems — the best way to go? I’m not real sure about that one.

Steve Montgomery

The proliferation of mobile payments systems may actually make their adoption by customers slower. Which do I chose? Will I be able to select and use more than one? If I do, will I have to call up that app every time I want to use it making it less convenient for me? Do I really want to have this many different payment systems having access to my information? The list goes on.

For the non-aligned retailers, which do I choose? Do I select one that has lower cost or the one more of my customers are using in the market? What do I do if another system is more popular in a different market or a different segment of the population? Can I have more than one? Will I need to have multiple hardware devices on my already crowded counter?

The market will eventually sort all this out, but in the meantime it’s really becoming the Wild West for mobile payment systems.

Ben Sprecher
Ben Sprecher
5 years 6 days ago
Lisa Bradner raises some key questions around whether directly competitive retailers will be able to participate side-by-side in the program and whether/how data will be shared among the participants. That said, I see MCX as being driven by two primary retailer desires: first, retailers hate giving up so much margin to credit/debit processors (often, payment processing fees are higher than the retailer’s entire profit!), and second, they hate the idea of a third party mobile wallet provider intercepting “their” consumer’s attention and interposing itself in their relationship with the shopper. On the fees side, I do see an opportunity for a win. But when it comes to *owning* the shopper’s attention, I think the ship has already sailed. The consumer’s attention in store is already lost to (or, at the very least, divided by) other mobile apps and tools. At best, you can earn consumer attention, but you can’t own it anymore. And when every customer starts walking in the store with PayPal or Google Wallet or Fill-In-The-Blank, the retailers are not going to want to turn them all away because they don’t use the right payment app. Credit cards proved that fear of losing the sale trumps distaste for… Read more »
David Dorf

The MCX is an attempt to keep Google and Isis honest, but in the long run I don’t think it will be differentiated enough to be successful. The goal here is to drive transaction costs down, which is hugely important for retailers.

Robert DiPietro

The MCX just adds another mobile payment system to the mix. How many can the industry have before the customer gets confused? The industry needs consolidation to move forward and enable a clear path for customers and merchants alike.

I assume the firewall protecting the merchant data will be significant. Typically, retailers aren’t eager to share that data with competitors.

Gene Detroyer

The creation of MCX says the retailers recognize the opportunity of the consumer access through mobile payment systems. But, unless their system turns out to be the most convenient and most universal, it will not be successful.

Mobile payments are all about convenience. It is not about brand loyalty or special deals.

Lee Peterson

This is an amazing breakthrough for the retailers, and a big challenge for banks, but that aside, the customer should benefit greatly.

But when it comes to this deal, I think it’s interesting to think about traditional store design and the customer journey and how that’s all going to have to change quickly. Do we need cash-wraps anymore? How else can we use that space? How do we cross-sell at checkout now? How do people buy on their own anywhere in a retail space and what does that mean?

Really a very, very interesting time to be in the retail field — fantastic change underway.

Bill Hanifin

MCX is a fascination. I do not know if it grew from the original Merchant Roundtable group but there has been a movement among big retailers to create an alternate payment system over the past 10 years.

Easier than trying to best Visa and MasterCard directly is for the merchants to tackle mobile payments. In some ways the alliance points towards the size of the prize as associations, telcos, internet providers, and now retailers are each forming their own coalition to create what they hope will be a prevailing solution.

I want to see the technical platform the group is building upon and understand how it compares/contrasts to Google Wallet, ISIS, etc.

Who will win remains in question. That things will change is without doubt.

James Tenser

This is a very significant development that should strike fear into the hearts of the traditional credit card forces and the mobile phone consortium known as ISIS.

It is the latest foray in the battle over exchange fees which has pitted retailers versus the mobile giants versus the credit card companies versus Silicon Valley upstarts like Google Wallet and Square. In addition to fierce competition to establish the preemptive standard for NFC payments and clearing, I’d anticipate intense lobbying efforts in Washington by the credit card industry to keep control over payments by excluding others from entering the “banking business.”

Ultimately all this competitiveness should be good for consumers if mobile pushes down transaction costs that are ultimately passed through in the cost of goods. The battle over control, however, may delay matters and lead to a world of parallel and incompatible standards.

In that scenario, merchants large and small will face pressure to accept payment in any and all forms, adding an undesirable complexity at the checkout.

Ralph Jacobson

I think this is a great idea. I also think smaller merchants have an opportunity to leverage the process that the larger retailers created. This is one area that retailers should have taken control of years ago. This is just as smart as, say, an airline buying an oil refinery because fuel is 80% of their cost structure. This just makes sense.

Christopher P. Ramey

This is about money and power. Ultimately the winner will be decided by the consumer. My gut is we’ll see a highly fragmented market for an extended period of time.

Mark Price

The creation of this new network will propel the mobile payment industry ahead by providing the critical mass to justify a significant investment in technology and infrastructure. This investment will be both on the part of software developers and the actual retailers themselves, who have chosen to stay on the sidelines rather than ally themselves with one of the numerous mobile payment providers. I

Al McClain
Al McClain
5 years 6 days ago

Great discussion but I heard scant mention of what this means to the consumer. It almost seems as though retailers are jumping in this because of the additional ways they believe they can market to shoppers, and the additional savings they hope to achieve. But, that can’t be can it, since at conference after conference we hear that the consumer is at the center of everything we do and satisfying them is our number one goal? Technology aside, if I were starting a mobile payment group (ha!), the first thing I’d do is ask a ton of consumers what they really want, and how they’d like their end of mobile payments to work.

John Crossman
John Crossman
5 years 5 days ago

Anything and everything that make the experience for a customer easier is a win. The buzz I hear on this is positive.


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