In the cluttered mobile payments market, mShift Inc. says it has a chance with its AnyWhereMobile system, which expands on its expertise in mobile banking.
AnyWhereMobile allows consumers to choose the mobile payment option from their banks site, allowing ACH payments without providing bank routing or account numbers to a third party. It also bypasses plastic cards by using QR codes and other wireless technology and cuts merchant interchange in half, says Scott Moeller, CEO of Fremont, Calif.-based mShift.
Moeller sat down with PaymentsSource to discuss what it takes for a new payments system to get from the idea phase to a real-time payment method at the merchant POS. This interview has been edited for length and clarity.
PaymentsSource: In working with banks and their mobile banking sites, how did mShift develop the idea for AnyWhereMobile?
Moeller: mShift has been around since 1991. Our first mobile banking deployment was in 2001, the first in the United States we saw mobile banking move from nice-to-have, to have-to-have, to a commodity. We realized the market was reaching a saturation point for mobile banking, but saw a real gap in payments. You had tech companies like Google and PayPal and carriers like Isis wanting to control payment streams, yet banks and credit unions were doing nothing in the space. Yet, they are the most trusted entity for payments.
PaymentsSource: The complaint against banks has always been that they were slow to embrace mobile payment technologies.
Moeller: You cant just have a great idea in Silicon Valley and then say, Hey banks, lets move on this, because banks just dont move like that. They get audited financial reports every year, and you have to demonstrate a history of successful deployments with banks before they will even give you the [time] of day. We saw ourselves as uniquely positioned because of our history and understanding of mobile banking.
PaymentsSource: You could view things from their perspective, then?
Moeller: Yes, but what we also learned is that banks and merchants talk entirely different languages when they are talking about payments. Is it interchange, or is it a merchant discount? We discovered this dysfunctional relationship between financial institutions and merchants where they view each other as the enemy. Its not good, and I believe the plastic card networks are the instigators of this. Its a difficult thing to change. If you lower the fee for the merchant, you lower the revenue for the financial institution.
PaymentsSource: So how did you make a change?
Moeller: If you are going to make a change to the payment system, you have to make sure the financial institutions are fairly compensated. You cant have it where they are earning less in mobile. For merchants, you cant charge more for mobile, because why would they support it?
PaymentsSource: What constitutes a true change to the system?
Moeller: In 2009, we had come out with a version of mobile deposit, and the Boston and Atlanta Federal Reserves were just firming up their mobile payments industry work group. mShift was invited to join, and we were able to have a seat at the table to develop best practices for moving forward from electronic to mobile money. We got a very deep education as to how retailers view payments and how the industry giants view payments, as well as where the chokeholds take place.
PaymentsSource: What became most apparent then, as you stepped into the payments market?
Moeller: What we have gleaned from 2009 to present is that you have some very strong industry players, whether its a carrier or a big tech company or the credit card networks, all looking at how they can control those channels. Many of them want to preserve the existing infrastructure. We saw an opportunity that benefits both merchants as well as the vast majority of financial institutions in the U.S. by making a change to that infrastructure, and not including the plastic card networks in that system.
PaymentsSource: Will your bank clients approach the merchants about your mobile system?
Moeller: Yes, and we will talk to merchants as well. Around the end of 2012, we went stealth mode on this. We solely talked to our customer base, our banks, to get a true understanding of interchange and what banks truly get. It is very hard for the banks to figure out what they really get. And its hard for merchants to understand what they are paying. We showed merchants how the app works, and there was urgency for us to get something like this to market. One merchant told us he pays Visa more each month than he pays for rent.
PaymentsSource: Was there any feedback from merchants that indicated they were tired of hearing about another mobile payment system or new technology they didnt understand?
Moeller: They were glad it was not like all of the other mobile payment systems they had seen. We have heard many times from merchants that they feel this is unique because there is no interchange, and they want to do away with the interchange system.
PaymentsSource: Can your technology be under the hood of something like the Merchant Customer Exchange initiative? That consortium of retailers seems to be talking about a somewhat similar technology approach.
Moeller: I can tell you that MCX and mShift are aligned for the same goals. But I have to be careful about anything else I say on that. I agree with what MCX is looking to accomplish, and we share the understanding that there is no need for the interchange fees and no need to keep a broken system. Weve had some differences in terms of compensation to financial institutions, because there is no way a bank is going to do something that will hurt its bottom line.
PaymentsSource: But MCX is really courting the banks now, correct?
Moeller: They understand it. There is an opportunity for us to be collaborative, but we could be competitors, too. We are both looking to achieve the same goal, but seeing it from different sides of the equation. They know retailers in and out; we know financial institutions and the burdens they face. The way I view anything that we are doing mobile is that it is a new network, one built using the best of ACH, but with innovations that enable the merchants to be assured their funds are secure.
PaymentsSource: What types of security layers do you use?
Moeller: When I say the payment is secure, I am talking about the merchant not worrying about a chargeback or whether they will get paid in three days. Plus, there are no card numbers, no data to store. We have multi-factor authentication throughout our system in our system, we have knocked out counterfeit fraud and duplicate fraud, it literally doesnt exist in this system, and thats 80% of the fraud that exists today.
PaymentsSource: No fraud at all?
Moeller: Heres the fraud that could occur. If I give my phone to someone else and ask him to get a cup of coffee with it, and I give him my PIN and then that person goes and buys a plasma-screen TV. I suppose that could happen.
PaymentsSource: What about the customer data? There is a lot of worry in the industry about who controls the data.
Moeller: We respect that the merchants data is the merchants data, and the banks data is the banks data. The merchant would still have the transaction data. We dont tell them what the customer has in his account, we just tell them the funds are good. We do it in real time.
PaymentsSource: Where does mShift go from here?
Moeller: There are too many meteors out there that flame out immediately. We are the long, slow one. We have talked to more than 50 financial institutions coast-to-coast. We got a lot of commitments to the pilot and tremendous data on how financial institutions large and small see the impact of Durbin. Weve operated as a secure cloud for financial institutions for more than a decade. We know how to do this. This is not a Square play, where you are targeting micro-merchants who had no ability to take part. This is a play where you have established, good merchants who are hurting under the existing system.