MCX, the group of leading US retailers led by Walmart and Target that is building its own mobile payment system, took another step forward this week by making the choice of technology for its initial deployment.
The venture chose barcode and cloud-based technology, a low-tech option but one that has already proved successful for Starbucks which enables its customers to make purchases using a QR code (also known as a 2D barcode) which is displayed on their smartphone screens when they open the Starbucks app.
A number of conclusions can be drawn from MCX’s news. One is that this is a blow to NFC (although it should be borne in mind the retail consortium is talking about an “initial” deployment so potentially leaving the door open).
The reason for its choice, said the retailer consortium, is that a barcode-based app will work with more smartphones and a wider range of merchant locations – many of which can accept barcode payments without major new capital expenses – than a system using NFC.
Secondly, the idea that MCX was set up as a bargaining tactic for its members, rather than a serious venture in its own right, can definitely be put to one side.
MCX already has 35 national retailers on board including the two big brands mentioned above, as well as other giants such as Best Buy, Dunkin’ Donuts, Gap and Sears.
Among the other wallet services are Google Wallet and Isis (both of which use NFC technology), as well as PayPal and Starbucks itself which is a partner of Square, the fast-growing payments start-up, in which it is an investor.
By comparison, Google Wallet has 28 retailers signed up, who have agreed to accept payments made in their outlets by subscribers with Google’s wallet app on their smartphones.
And PayPal has just announced that it has reached 23 retailers who enable its subscribers to make payments in their stores. Isis has signed up local retailers in the two cities where it launched a trial and also has seven national retailers signed up.
Yet, the picture is also more complicated than it first appears. Of the 35 retailers mentioned on the MCX website, five have also agreed to accept payments from other mobile wallets.
For the record, Banana Republic, Old Navy, CVS/pharmacy and Sunoco are with both MCX and Google Wallet, while Dillard’s has loyalties with both MCX and Isis.
On the face of it, this seems to conflict with a media report that said MCX is signing up participating retailers on an exclusive basis, at least for an initial period.
Responding via email, an MCX spokesman did not address my question about exclusivity. Instead he said: “Most individual merchants have indicated to us that they want to handle mobile payments in one way. It comes down to what an individual merchant wants to do.”
Never mind. Let’s assume there is some kind of stipulation from MCX on its members. In which case, how to explain the crossover with other payment systems? Here’s a partial explanation: Some retailers are signed up to Google Wallet by virtue of accepting transactions based on MasterCard PayPass technology, including CVS/pharmacy and Sunoco. This is rather than being fully signed up to the Google SingleTap system, which is not just about payments but also about redeeming offers and loyalty points.
It’s possible they could be treated as “exclusive” by MCX even if they are accepting PayPass transactions. Mind you that doesn’t explain the two vendors (Banana Republic and Old Navy) who are signed up to Google’s SingleTap system (the status of Dillard’s/Isis is unclear).
This all matters because we are trying to understand whether or not MCX is managing to woo away retailers from its rivals. This will become clearer in 2013.
Next steps for MCX will include the appointment of a CEO, as well as the choice of vendor to supply the mobile wallet that will support its barcode-based payment system.
Blogger Tom Noyes, who correctly predicted MCX’s choice of barcode technology, is tipping the venture to choose Gemalto as its wallet vendor, which would be a safe choice given how many other wallet contracts the French vendor has already won.
The key goal of the venture is to reduce how much its participating retailers pay Visa and MasterCard for handling card transactions, a longtime bugbear for retailers in the US.
Also at stake for retailers is control of their customers’ data as they enter an era when information about shopping habits will increasingly be as valuable as any physical goods sold by retailers.
In which case, MCX has to hold together an alliance full of rivals. For instance, Walmart and Target are presumably unwilling to share customer data with one another, even though one of the aims of such a venture is to build a complete picture of an individual’s shopping habits.
There must be a strategy in place for how to segregate rivals’ data in the MCX system. Or perhaps an approach that maintains anonymity for customers while sharing general trends. In other words, the venture is more complex than it first appears. Which is also true of how the whole mobile payments market is starting to shape up.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.