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MCX: Over Before It Starts, or Holding the Trump Card?

  • By Andrew Deichler
  • Published: 4/30/2015
The Merchant Customer Exchange (MCX) isn’t having the best week. First, one of its marquee merchants defected to Apple Pay. Then its CEO resigned. Is this the beginning of the end for the merchant consortium, or just a bump in the road?

Best Buy announced Tuesday that customers can now use Apple Pay to make purchases via its mobile app. The electronics retail giant also expects to begin allowing Apple Pay at the point of sale later this year.

MCX said in a statement that Best Buy continues to be a “strong MCX partner” and a supporter of its CurrentC mobile wallet. Still, this is quite a significant development, since many MCX merchants—such as Best Buy—taken an anti-Apple Pay stance up until this point.

Then on Wednesday, MCX CEO Dekker Davidson announced that he is leaving the merchant consortium to pursue other opportunities. He is being replaced by an interim CEO—former Bank of America Merchant Services CEO Brian V. Mooney.

Another Softcard?

Just a few years ago, Softcard—then called Isis—was the hottest topic in mobile payments. But after a lengthy development period and a name change, the AT&T/T-Mobile/Verizon Wireless mobile payments joint venture is all but forgotten. It officially shut down at the end of March.

Certainly, this week’s bombshells don’t bode well for MCX. But before we declare the retail consortium the next Softcard/Isis, MCX may still have an ace in the hole.

At the NACHA Payments 2015 Conference last week, Andy Shober, chief sales and business development officer for MCX, indicated that CurrentC will incorporate customer loyalty programs. This may give it a leg up on Apple Pay, which currently does not incorporate retailers’ private label cards.

Furthermore, while Apple Pay’s tokenization solution protects customers by transferring a random number instead of customer data from the phone to the merchant, it also keeps that merchant from recognizing the customer. “While I think what Apple’s done is very noteworthy, look at the feedback from consumers,” Shober said. “Two-thirds of the customers who tried this the first time reported a bad experience, because people in-store didn’t know who they were or how it worked. When you get into loyalty and recognizing that I’ve been shopping online, in-person or via plastic or mobile—that’s critical for success.”
A retail payments analyst who was also present at last week’s Payments conference agreed that MCX should stay the course here. “After hearing that Belk pulls 50 percent of its sales from their self-branded cards—which can’t be loaded onto Apple Pay—I don’t see why they shouldn’t go through with it,” he said.

The analyst believes it is far too soon to concede the mobile payments race to Apple Pay, given that it’s still very much an open playing field. “PayPal’s deep pockets could possibly make the Paydiant platform more interesting to the merchants,” he said. “I’m guessing [MCX] hasn’t sunk anywhere near the investment that Softcard had made; plus there’s the widespread usage of Starbuck’s wallet, paving the way for barcode adoption by consumers.”

Conversely, the analyst added that MCX was originally formed primarily to block Softcard/Isis and to use barcode scanning instead of near-field communication (NFC) technology. “Everything is different now, including the fact that host card emulation (HCE) can side-step the carriers and work on any Android phone,” he said. “If Apple Pay allows private-label cards and merchant-control of the data, then the last reason to adopt CurrentC might drop away. Also, it’s possible MCX now wants to add NFC to CurrentC, which would be a major pivot.”

But MCX’s biggest problem, however, is the classic difficulty of consortium-based “management by committee,” the analyst concluded. Ultimately, each retailer is going to do what it believe is best for its own sales-driven interests—and that could mean dumping MCX for Apple Pay or another mobile wallet.
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