Tuesday, September 9, 2014
Apple Inc. made a big splash Sept. 9, 2014, when it announced Apple Pay, its near field communication (NFC)-powered mobile wallet, will be available on the soon-to-be-released iPhone 6, iPhone 6 Plus and Apple Watch. Some analysts have weighed in, stating not only is this the death knell for plastic payment cards, it is also the birth of a behemoth that could knock out competing mobile payment schemes vying for market dominance.
One such competitor is Merchant Customer Exchange, a mobile wallet being developed by leading retailers. Of all the high profile mobile wallet developers, MCX has been the most secretive. On Sept. 3, 2014, MCX offered a tantalizing peek into CurrentC, the brand name for its mobile wallet expected to launch in 2015.
MCX seems focused at the outset on the loyalty aspect of its wallet. MCX said, "CurrentC will simplify and expedite the customer checkout process by applying qualifying offers and coupons, participating merchant rewards, loyalty programs and membership accounts, and offering payment options through the consumer's selected financial account, all with a single scan."
As a mobile app offered to consumers as a free download from the app stores of Apple and Google Inc., CurrentC will be able to store and automatically apply retailer-specific offers and discounts from the merchants on MCX's prodigious network, which includes 7-Eleven Inc., Best Buy Co. Inc., Lowe's, Sears Holdings, Shell Oil Products US, Sunoco Inc., Target Corp. and Wal-Mart Stores Inc. CurrentC will also allow consumers to earn rewards that apply to the loyalty and membership accounts stored in the app. "Existing rewards, once entered, are detected, applied and earned automatically during the transaction," MCX said.
MCX also placed an emphasis on the data security that underscores the mobile app and corresponding network. "CurrentC will provide a more secure payment experience than traditional methods by storing users' sensitive financial information in its cloud vault rather than locally on the mobile device," MCX said. "Furthermore, the application uses a token placeholder to facilitate transactions instead of constantly passing the data between the user, merchant and financial institution. These innovative approaches to security are only a sample of industry leading tools used by CurrentC to create a comprehensive, layered approach to information security."
CurrentC is also being touted as merchant friendly, with retailers not having to upgrade current POS systems to integrate MCX's app. "CurrentC is a software-based solution that works with most existing point-of-sale and payment terminals – providing merchants large and small with a cost-effective entry point into the mobile payments movement," MCX said. "CurrentC will utilize a secure paycode and will not require additional hardware from most customers or merchants."
MCX said CurrentC will remain in private pilot testing mode through 2014, with regional and national rollouts to follow in 2015.
MCX launched in August 2012. Its network comprises over 70 brand-name retailers that together process in excess of $1 trillion annually in transactions at more than 110,000 retail outlets that span practically every vertical market, from quick service restaurants to convenience stores/gas stations, big box retailers and national grocery markets.
On mobile marketer Mobiquity Inc.'s blog page, Mobiquity Technical Advisor Robert McCarthy wrote in an August 2014 post that FIS Global will process CurrentC payments, while Paydiant Inc. is building the white-labeled mobile app. McCarthy noted that the FIS-owned mobile app developer mFoundry powers Starbucks Coffee Co.'s popular mobile wallet, as well as the Bank of America banking app.
McCarthy believes MCX's partnership with Paydiant was a wise move. "Paydiant’s technology will allow MCX member merchants to leverage existing smartphones, POS and payment terminals," he wrote. "It will include an easy-to-implement application programming interface (API) to enable MCX members to integrate complete mobile wallet capabilities and value-added services into their own branded iPhone and Android applications. In addition, the solution will allow retailers to avoid sharing sensitive customer information with third parties."
With the Starbucks app, transactions are facilitated at the POS by means of quick response (QR) codes. McCarthy thus believes that the MCX solution will likely leverage QR codes as well. "This is obviously an intriguing initiative, one promising massive change in the industry," he wrote, adding that MCX may result in "something wildly disruptive and valuable to consumers and merchants alike."
Initial reactions from payment consultants to MCX's announcement focused on the emphasis MCX puts on retailer issues, namely loyalty and merchant acceptance, rather than the consumer experience. Aite Group LLC Analyst Nathalie Reinelt said, "[I]t appears that they will be deeply focused on loyalty programs compared to Google Wallet and Isis (Softcard), which should offer a greater incentive for consumers to give their mobile payment platform a try."
Rick Oglesby, Senior Analyst/Consultant at Double Diamond Group LLC, added that "MCX is really focused on the merchant; it wants to promote merchant branding, build merchant-to-consumer relationships and reduce the cost of merchant acceptance."
MCX will also be able to leverage its extensive merchant network to drive consumer adoption. Oglesby said the ideal time to enroll consumers in a new program is at the POS, as less effort is needed at that time to convince consumers to change payment behaviors. "Because MCX is merchant controlled, it can best access consumers at the point of payment and is therefore very well positioned to drive change in payment behavior," he noted. "This should be a big advantage for MCX/CurrentC."
As for the "secure paycode" technology MCX mentioned in its announcement, Reinelt believes it could mean either QR code- or bar code-based payments. In terms of sophistication, such payment methods are technologically simple in comparsion to NFC schemes. However, Reinelt pointed out that both Google Wallet and Softcard use NFC technology but have struggled to win over consumers.
"However, Starbucks – which uses barcode technology, but offers an attractive loyalty program – continues to see impressive growth in their mobile payment volumes," Reinelt said."The important aspect of MCX's offering isn't that it is not using NFC, it's that it is focusing on loyalty and tokenized secure payments, which will set them up to be highly competitive."
Oglesby also believes tokenization is a key feature of CurrentC. "Traditional NFC models pass a standard card number through an NFC-equipped terminal," he said. "A tokenized solution can use a broader set of technologies (QR code, bluetooth, sound emission, or even NFC). We may eventually see MCX embrace NFC, but not without tokenization, and not within the rules imposed by the traditional payment networks."
Will MCX succeed? Will NFC-based Apple Pay soon dominate the field? With mobile technology developing at such a rapid clip, is it possible a new contender could rise and grab the lion's share of the market, leaving current contenders in the digital dust? It's still too early to tell.
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