Merchant acquirers and processors are looking at a far different payments landscape in light of recent and anticipated developments from the Merchant Customer Exchange, Apple, Amazon.com and other companies.
MCX, which is backed by major retailers including Walmart, Target and CVS, has begun testing its CurrentC mobile wallet; and Amazon is separately testing a mobile wallet of its own. As for Apple, many reports indicate it will announce a mobile payment system with the support of Visa, MasterCard and American Express next week.
The introduction of so many new payment technologies from such major retailers indicates that merchant acquirers will have to quickly adapt to a new set of standards.
"Merchant acquirers are really having a tough time right now, waiting like everyone else for Apple to kind of define things," said Paul Martaus, merchant acquirer consultant and industry researcher. "They really are the player at the moment. All of the card brands are listening to them, everyone is going to listen to Apple because they perceive that Apple wields a big stick."
The wariness comes, in part, from Apple's tendency to force new hardware standards upon its partners. For example, something as simple as a headphone jack which Square and other mobile payment companies rely upon may be going away in favor of a headphone module based on Apple's Lightning port.
"What if Apple has told the card brands it will incorporate Near Field Communication, but they have a new way of doing it?" Martaus said. "That could change everything."
First Data, Global Payments, U.S. Bank, and others in acquiring and processing will need time to respond to "whatever it is that gets decided amidst all of these changes," Martaus said. "It may seem like these companies have unlimited resources to do this, but they don't."
All of the major processors have likely been talking to the card brands, MCX, Apple, Amazon and others all along, but their preparation won't automatically translate to merchant or consumer adoption, Martaus added.
Merchant acquiring and processing operates in a "have and have-not" world, said Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup. "So the questions are how far will these rollouts go and will it have big takeup with the small merchants?"
There is just as much uncertainty with MCX, which has been developing its payment scheme for more than two years but has not set a firm launch date or provided other pertinent details on how its technology will operate, Riley said.
The flood of recent developments is extremely important for merchant acquirers because they know they are on the front lines when new payment types seek merchant acceptance, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
"No matter what scheme takes hold, the acquirers have to leverage their existing relationships and network connectivity," Crone said.
Acquirers and processors, often representing the acquiring bank, handle many aspects of the payment network, including point of sale hardware and software integrations to the payment gateway connections for merchants.
"There are a lot of moving parts and for MCX, and especially Apple, it is more complicated by bringing in the mobile element," Crone added.
Acquirers and processors will also have to understand any potential changes in interchange when working with their merchants.
A key question for everyone involved in the payments chain will be whether MCX, Apple and Amazon will be able to convince the card brands that their security measures are strong enough to qualify for lower card-present rates, rather than card-not-present rates typically applied to e-commerce transactions, Crone said.
"If that is the case, it would be a significant part of any announcement of a mobile wallet, essentially an endorsement and acknowledgement of greater security and stronger authentication," Crone said. "It would eliminate the physical card and provide lower rates."
In addition, MCX stands to get a big boost from such a scenario with its cloud-based approach to payments.
"With the cloud, you pull credentials out of the system and send tokens all around," Crone said. "This is a significant part of the sea change, and maybe the most significant reason for the card brands being involved."