In a play to develop a mobile wallet of their own, a joint venture of retailers is working to attract banks to help it provide a merchant-friendly alternative to Isis, PayPal and Google Wallet.

"There will be issuing institutions and we hope all issuing institutions — some will be more eager and some will be more resistant — are included in the [Merchant Customer Exchange] at some point in time," says Mike Cook, Wal-Mart's vice president of finance and assistant treasurer, in an interview.

The Merchant Customer Exchange — which includes 7-Eleven, Best Buy, CVS, Lowe's, Sears, Shell, Target and Wal-Mart — has already begun building its own mobile payment applications.

"In our view, the legacy payments system has numerous inefficiencies, whether it's fraud losses" or otherwise, Cook says. "We have a more highly secure technology with mobile handsets than we do with a magnetic stripe card, where someone scribbles something down on a signature capture device and sometimes doesn't even do that clearly."

Reports first surfaced that Wal-Mart was working with Target, as well as other retailers, to develop a mobile wallet in March.

Some experts wonder if these retailers — each individually worried about their own bottom lines — can work together effectively with each other and with banks.

"Both merchants and banks will naturally follow incentives to improve their own bottom line, yet consumer research shows that it takes a tangible benefit … to get the consumer to choose new alternatives," says Jim Van Dyke, president of Javelin Strategy and Research. "MCX will face the same limitation that has limited bank-sector consortiums: getting an aggregate of individual business entities to act as one in a way that provides more tangible benefit to the consumer. It can be done, yet the challenges are steep."

In the end, "it's all about consumer adoption, if you can start getting consumers to get used to using their phones for payments you can evolve into something more sophisticated," says Mahesh Makhija, Infosys' head of financial services in the Americas.

The exact nature of MCX's technology remains unclear, but it could start off with bar codes, similar to how Starbucks designed its closed-loop mobile payment system.

Makhija says he expects to see the market become flush with players before it eventually consolidates.

"I think Apple will set the standard, with their closed mobile ecosystem" Passbook, he says. "They will define how a mobile wallet should look, and they are going to try to monetize it."

As for Cook, he says details about MCX will be released when the time is right and the technology is mature.

"It's more important that we get it right than it is speed to market," he says.

Aite Group senior analyst Rick Oglesby says the retailers have no interest in replacing the existing payment infrastructure. They're more interested in marketing opportunities, he says.

"Payments is a component of it, but it's about creating customer engagement solutions," Oglesby says. "Merchants are only interested in marketing … payments are only in it because it's the end game of marketing."

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