Never Let the Lack of Information Prevent You from Calling the Race: MCX Vs. Apple Pay

In the article titled “ApplePay vs. MCX: Which has bigger potential in mobile payments?” the two newpayment mechanisms are reviewed in an ad hoc approach. Though an interesting andwell written piece regarding Apple’s recent announcement, the article is anexample of many reports and announcements that requires greater clarificationand understanding of the topic from a macro-and micro- level.

The article starts off with retailer willingness to embracethe new players:

‘While big retailers such as Walmart and Best Buy are eschewing Apple’s newdigital wallet in order to support retailer-driven alternative MCX, ultimatelythe winning vote will be cast by consumers, where Apple has the advantage.

Ithas been a couple of big weeks for mobile payments with MCX announcing itsfirst pilot program last week and the highly anticipated unveiling of Apple Paytaking place earlier this week. While MCX is the brainchild of the some of thelargest retailers in the United States and retail buy-in is one of theimportant factors in the success of a mobile wallet, Apple boasts several otherkey advantages.

“ApplePay should have a bigger impact since more and more merchants will sign on asconsumers adopt the new iPhones,” said Drew Sievers, former CEO at mFoundry andnow founding partner at fintech investor Operative Capital.

“Simplyput, people are more excited about Apple as a brand than they are about 7-11,”he said.

“Ultimately,consumers will be the ones in control. If they choose Apple Pay en masse, thenthe merchants will have no choice but to follow.”

First, it should be made clear that if a merchant supportsNFC for Visa and MasterCard then they will also be accepting Apple Pay –refusing acceptance is not an option. Related to brand awareness I would argue that the only consumers that preferApple over 7-11 are those that sleep with their iPhone or MAC; and rememberyour attitude towards a brand almost certainly changes when you want ice creamat midnight.

The iTunes user base is identified as a major advantage forApple:

“Oneof Apple Pay’s key advantages is that it the company already has millions ofconsumers credit card information already on file through iTunes, therebymaking enrollment and use easy for consumers.”

But of course it isn’t as if Wal-Mart, Target, Macy’s,Sears, Neiman Marcus, Best Buy, and other large merchants don’t have anyconsumer credit card information. Many merchants have their own branded creditcards and those card holders may be a tad more conflicted in relation to brandpreference! It needs to be rememberedthat MCX is a coalition of merchants and needs to be considered (at some level)as a group.

Then the comparing becomes a tad less organized:

“MCX,on the other hand, is an unknown entity to consumers.

“Byand large, people like their existing credit and debit cards,” Mr. Sieverssaid. “Getting them to switch from an existing card to a new MCX card will be asignificant challenge.

“Apple’scontrol over their hardware, software, and an existing payment source puts themin a much better position than MCX,” he said.

ApplePay will be available in the new iPhone 6 and Apple Watch devices.

Inthe past, Apple users have quickly migrated over to the new iPhone once itbecomes available. If the same happens this year and given that Apple Pay isbeing integrated by a number of merchants, including Macy’s, McDonald’s,Sephora, Subway and Walgreens, its impact could be felt quickly.

Themajor payment networks and leading banks such as Bank of America, Chase andCiti are also supporting Apple Pay.

MCX,on the other hand, is currently in a limited pilot and will be rolling out morebroadly next year.

“Wedon’t have enough details on MCX’s offering, since they are holding their cardsvery close to the vest, so it’s too soon to speculate on their success,” saidNathalie Reinelt, San Francisco-based analyst at Aite Group.

“MCXhas several big box merchants signed on, but will need to get the word outabout their mobile payment platform to consumers,” she said.”

Again, MCX is not the brand, CurrentC is the product thatthe major merchant brands that participate in MCX will bring to market. There is no discussion of merchant loyaltypoints or incentives which MCX and merchants will almost certainly bring tobear to garner consumer adoption. Applehas not yet indicated any such consumer incentive. There is always some significant percent ofconsumers that can be bought, for me it was 10 cents off each gallon of gas(thank you Cumberland Farms!).

The article admits the fallacy of this being a two horserace:

“WhileApple and MCX are shaking up the mobile payments industry, it has by no meansbecome a two-horse race.

Forexample, one of the challenges faced by Apple Pay include that it onlyaddresses iOS users, meaning all those Android users are still up for grabs.

WhileGoogle Wallet has not caught on in any significant way to date, there is stillan opportunity for it to play a more meaningful role.

“MCXmay, or may not, survive long-term,” Mr. Sievers said. “Google is still wellpositioned to be successful given their control of the operating system,payment credentials, and hardware.

“I’dbe surprised if they weren’t working on a response to Apple Pay,” he said.“Ultimately, Google and Apple should be in the strongest position to facilitatethe mobile payments market.”

Whilenot all the current players are likely to survive, the space will supportseveral players.”