The mega-retailers' Merchant Customer Exchange venture argues that the mobile-payment system it is developing will appeal to retailers in a way no other mobile wallet can. That’s leaving some companies divided on which mobile approach is best—MCX's focus on gaining retailer acceptance or the emphasis on consumer adoption championed by Isis and others.
Though MCX is competing with the mobile carriers' Isis venture, which has won over several bank partners, a Citigroup executive spoke in support of MCX. Meanwhile, retail giant Home Depot has so far chosen not to join MCX, despite sharing many of the concerns that the MCX owners raise.
“I’m inherently concerned about adding another mouth to feed in the payments channel,” said Dwaine Kimmet, the company’s treasurer and vice president of financial services, in a panel discussion at the National Retail Federation's annual convention in New York.
Home Depot instead signed up as an early supporter of PayPal's digital wallet, and “legal restrictions” in its deal with PayPal currently prohibit Home Depot from participating in MCX. Even so, the home improvement retailer is keeping an eye on the initiative and its potential impact on retailers of all sizes.
“The thing I’m most supportive of is they want to develop a wallet that midsize retailers can use,” Kimmet said.
Bill Johnson, CEO of Citi Retail Services, voiced his support for the merchant-led MCX initiative as a more secure option compared to products from developers that are new to the payments sector.
“As an issuer, I’d rather not have to deal with 15 different types of technology because every piece of technology that we use has to be bank-grade,” he said.
“We would be supportive of something developed by the retail community," he added.
MCX and Isis are employing two different strategies to build critical mass for their offerings. Isis is focusing on gaining consumer acceptance through smartphone hardware, counting on the continued expansion of smartphones equipped with Near Field Communication technology. For devices like the iPhone that don’t support NFC, Isis is working to deploy phone cases that are embedded with NFC chips. Isis is banking on consumers with NFC capabilities to demand contactless payment from retailers.
The MCX strategy focuses on growing retailer acceptance of its mobile wallet. The consortium announced at the convention that the first iteration of its wallet will be cloud-based and use bar codes to complete transactions, which officials say will lead to faster adoption. By providing a single mobile wallet experience across a wide spectrum of retailers, including Walmart, Dunkin’ Brands, Lowe’s, Gap and others, MCX seeks to provide a consistent product for consumers.
Johnson said the strategy that works the fastest will ultimately prevail.
“As soon as it ads scale at the retailer or consumer, it will flourish,” he said. “But who’s going to create that capability?”
But another panelist, Doug Stephens, a former retail executive who’s now a consultant who focuses on the future of retail, says neither Isis nor MCX will succeed.
“They’ll fail because they’re being mercenary. MCX is trying to protect the retailers and Isis is trying to take away share…They’re looking at it too transactionally and won’t gain consumer adoption," he said.
Current mobile wallet efforts won’t have the same impact that other innovations—such as mobile credit card readers like Square—have made on the payments industry, Stephens said.
“My credit card isn’t broken and transferring that to a device that only has a five-hour battery life isn’t transformational,” he said.