The mobile payments market is becoming increasingly crowded as technology companies, retailers, banks, and card networks compete to influence how consumers pay with their smartphones. Apple Pay, Samsung Pay, and other digital wallets are expanding their reach, while the Merchant Customer Exchange is taking a different approach with CurrentC. Rather than relying primarily on traditional credit card networks, MCX mobile payments are designed to give retailers access to lower-cost payment methods while integrating loyalty programs and rewards. The competing strategies highlight a broader battle over fees, customer relationships, and control of the emerging mobile payments ecosystem.
Apple Pay expands its participation, Samsung Pay announces availability and participating issuers, and MCX finally launches a CurrentC pilot program. This article in Yahoo Finance reviews the payment wars:
“A long-delayed mobile payments service developed jointly by leading retailers including Walmart Stores (WMT), CVS (CVS) and Target (TGT) is inching ahead this week, with the start of a public trial in Columbus, Ohio.
The Merchant Customer Exchange, or MCX, said consumers will be able to try its mobile payments smartphone app, called CurrentC, at select stores in the Midwestern city. Meanwhile, Apple (AAPL) last month extended its competing solution, Apple Pay, to the entire United Kingdom after launching nationwide in the United States last fall. Other mobile competitors, including Google (GOOGL) and Samsung, are also targeting general availability later this year. And PayPal (PYPL), just spun off from eBay (EBAY), is expected to make a play for mobile as well.
But behind the scenes, the competition is really just the latest battle in a long-running war between the major retailers and the big credit card networks, Visa (V), MasterCard (MA) and American Express (AXP). Retailers have fought in court, in Congress and now in smartphone apps to reduce the payments power — and fees — of the card networks. Apple and Google have been working closely with the card networks.
MCX, a partnership between retailers and restaurant companies, is seeking to develop apps that rely instead on competing payments sources that charge retailers lower fees, such as debit cards, private label store cards and direct access to checking accounts — to essentially bypass credit card networks altogether. As an incentive for consumers, MCX plans to incorporate retailers loyalty programs directly into their apps, making it easier for consumers to rack up rewards points and acquire special offers.”
Brian Mooney, MCX’s new CEO admits to a few missteps but is certain MCX will be one of the winners:
“Some analysts say MCX, which was formed to get into the payments market three years ago, has squandered an opportunity to get out in front on mobile payments. The consortium members agreed to accept MCX exclusively for mobile payments for three years, but the exclusivity period recently expired. Some MCX members, including Best Buy (BBY) and Rite Aid (RAD), have alreadyannounced they will soon be accepting competing mobile payment apps like Apple Pay.
“The (joint venture) has faced some serious headwinds, most of them of their own making, and the outlook remains grim,” says James Wester, an analyst at IDC.
MCX CEO Brian Mooney concedes that the group has made some mistakes. Creating an app that meets the needs of all of the many members of the consortium has been a challenge. The effort “made a misstep or two along the way but we’ve learned a ton,” he says. The beta test will provide further feedback and Mooney declined to set a date for a nationwide rollout.
But Mooney notes that mobile payments are still in an early phase. That’s backed up by surveys of early usage of Apple Pay. Only 1 in 50 people who own a recent Apple iPhone are using Apple Pay on a regular basis, a survey by Trustev found in March. While 1 in 5 had tried the service at least once, most dropped off or use it only occasionally. More broadly, less than 0.5% of all phones capable of making contactless mobile payments were used to do so at least once a month in 2014,according to Deloitte Touche, which predicts such usage will rise to 5% by the end of this year.”
“Ultimately, MCX’s Mooney argues, there will be two or three “decent-sized” winners in mobile payments. “We’re very confident we’ll be one of them.”
Although MCX faced delays and challenges bringing CurrentC to market, the mobile payments industry was still early enough that no clear winner had emerged. Apple Pay had generated substantial attention, but relatively low levels of regular usage demonstrated that consumer habits would not change overnight. That left room for competing services to differentiate themselves through rewards, convenience, merchant acceptance, and the underlying economics of each transaction.
MCX mobile payments offered retailers a particularly different proposition. By emphasizing debit cards, private-label cards, and direct access to checking accounts, CurrentC sought to reduce merchants’ reliance on traditional credit card networks and the fees associated with them. Integrating retailer loyalty programs could also give consumers an additional reason to use the service, especially if rewards and discounts were compelling enough to overcome the inconvenience of adopting another payment app.
The larger mobile payments competition therefore extended well beyond which smartphone wallet offered the easiest checkout experience. Apple, Google, Samsung, PayPal, MCX, card networks, and major retailers were competing for influence over the customer relationship and the economics behind every transaction. MCX still had significant hurdles to overcome, including retailer defections from its exclusive model and the challenge of building consumer awareness. However, with mobile payment adoption still developing, the market remained open enough for multiple platforms and business models to compete for a meaningful share.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
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