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When MCX (Merchant Customer Exchange) announced that they were going to launch their own mobile payments platform in 2012, that news reverberated in the American payments market like a shot. Prior mobile payment efforts were impressive thanks to heavyweights like Google, First Data, AT&T, Verizon and T-Mobile putting their considerable reputations and resources behind them. But MCX brought Walmart, K-Mart, Sears, 7-11, and Target amongst others to the field and it was clear that their massive retail presence would change how the game would be played.
Now we know a bit more about what MCX plans to do thanks to a January panel at the National Retail Foundation Show. Early rumors of MCX taking a contrarian view on the use of NFC (near field communications) technology appear to be correct, as MCX disclosed that they would rely on barcodes – retro technology your grandmother would be familiar with – to launch their mobile payments service. MCX execs cited the ability to roll out a barcode-based solution widely and without investment in additional hardware at the point of sale as the rationale for the choice. That was no surprise as this approach would speed time to market and ensure a fast track learning curve for consumers who are used to barcodes for loyalty programs and coupons. Add support of this technology by nearly any mobile device which can handle images, including many feature phones, and it makes even more sense. MCX was making a pragmatic choice that didn't rule out future adoption of NFC or any other technology as it becomes more widely adopted.
What was surprising about MCX's announcement was how candid they were in their aspirations for the new platform. Two objectives were cited in what they hoped to achieve. First, they want complete discrete ownership of customer data and to have it only accessible on a per retailer basis. So only Target knows what Target customers purchased via the platform, keeping that strategic information under their control. This is a clear message to Google and others with aspirations of mining customer data that MCX retailers are not about to step into the trap of allowing some third party to have access to their customer purchasing patterns for the purpose of selling the intelligence they glean right back to the retailer. Savvy move.
Next, MCX has an even bigger aspiration: they want to use the platform to bring down their payment processing costs. This is a direct swipe at credit card companies such as VISA, American Express and MasterCard. MCX mobile payment customers will not see familiar credit card logos associated with the platform, and credit, if it's offered at all, will be via the store-branded cards that are often associated with higher user fees and limited kinds of rewards. What's more likely is that retailers will steer customers towards direct debit transactions or even Dwolla payments as a way to get these processing costs as low as possible. Target is doing this already with their in-house card.
Credit card companies will be watching with interest what impact this will have on their share of the payment pie as they are shoved to the sidelines. Retailers have complained for years that they had not seen significant reductions in processing costs as technology improved, and now MCX is going to use mobile payments as a way to do something about it.
But what of the customer? Will they find MCX's offering to be worth the move from their favorite credit card providers? It's too early to say, as we still don't know the details of the users experience. How will customers receive and redeem coupons? Will there be a significant difference in how customers with feature phones use the platform versus customers with smart phones? What will the cash register experience be like as customers fumble for their phones and attempt to make them show the appropriate bar code to allow them to check out and get their discounts? Will this technology leave retailers open to the "photo hack" where a user simply photographs someone else's barcode and uses it for making purchases? Credit card companies don't support bar codes for payments for just this reason. Finally will cost-conscious consumers give up their familiar credit expectations in favor of this new model? There are more than a few consumers who have outstanding balances that may not want to use direct debit or be captive to the terms of a retailers' card.
Perhaps most importantly, MCX has made it clear that its mobile payment competitors ISIS and Google should not expect to have their products supported by MCX retailers any time soon. Tens of thousands of retail locations will be off limits to these players acting as a cap on what market share these companies can hope to achieve. So while MCX will no doubt increase the number of people using their phones as a way to pay, they will be limiting the likelihood that customers can choose just one way to pay when they reach for their mobile phone.