Tuesday, March 17, 2015
Can financial institutions and merchants work together on an open, common platform for bank- and retailer-branded mobile wallets with "frictionless activation and redemption of loyalty and offers"? Mobile payment consultant Richard Crone is betting they can, and he's launching the Merchant Financial Institution Council to help bring it to fruition.
Crone described the initiative as an alternative to Apple Pay and noted that mobile wallets are an important customer touch point, especially with the millennial generation. "If you simply cede this market to Apple, Google [or other nonbanks], you will lose that touch point forever," Crone said in announcing the MFIC in early March 2015 at the BAI Payments Connect conference.
"The MFIC charter would be an inclusive and transparent working group of all the payment stakeholders dedicated to leveraging an open, common acceptance platform that includes support for retailer and bank-branded mobile wallets and tender reciprocity," Crone stated in interviews following the conference.
Tender reciprocity refers to the acceptance and provisioning of bank-issued, open-loop credit and debit cards inside retailer branded apps, and standalone mobile wallets like Apple Pay and CurrentC, as well as provisioning and access to retailers' closed-loop, private-label card and loyalty programs inside bank-branded wallets.
Crone is optimistic about the MFIC. He pointed to the positive reception he received at BAI (about 100 attendees requested additional information, he said) and preliminary conversations with organizations representing both banks and retailers.
Crone also referenced recent comments made by Andy Shober, Chief Sales and Business Development Officer at the Merchant Customer Exchange (MCX), which developed CurrentC. According to a transcript of the exchange, Shober's remarks came during a Q&A at a recent Merchant Advisory Group conference in Dallas. "I think banks and merchants have a tremendous opportunity to work together directly," Shober said. "We have customers out there. There are things that we can work on to mutual gain," according to a transcript of the exchange."
Crone believes it's time to "throw away" nondisclosure agreements. "Let's talk openly about how we can do this," he said. MFIC participants would include executives from financial institutions (both issuers and acquirers), retailers and end user organizations. "Any entity that wants to can be part of this," Crone added.
Members would work on defining business models, best practices, standards, accreditation, procedures and other factors that might impact the mutual acceptance by banks and retailers of each other's credit, debit and rewards offerings, as well as standalone mobile wallets such as Apple Pay, CurrentC and Google Wallet. "Addressing these [requirements] will allow the industry stakeholders to use the MFIC initiative to confidently take action and establish new business terms between the parties," Crone said.
By working together in support of tender reciprocity, Crone believes, financial institutions and merchants can provide mobile wallets that are superior to Apple Pay. Apple has made transaction anonymity a key to the Apple Pay offering; in other words, merchants are locked out of valuable customer data flows.
"It's not about the money, but rather all the value that can be delivered before, during and after transactions," Crone said in his remarks at BAI Connect. Apple Pay doesn't deliver much value to merchants; it creates new hassles such as the need for merchants to install near field communication-enabled devices to accept Apple Pay, he noted.
Analysts at UBS Securities LLC addressed these issues in a recent report, The Empire Strikes Back: Retailers and Banks to Join Forces as Alternative to Apple Pay in 2015. "New payment approaches need retailer support, which Apple Pay largely lacks because it cannot handle ads and offers with its one-way technology," the report stated. The report pointed out that financial institutions have an economic incentive to develop products that compete with Apple Pay. "Allowing intermediaries like Apple Pay to succeed subordinates the brand, commoditizes the experience, and creates excessive fees from the perspective of issuers and merchants," it stated.
Card issuers that signed on with Apple Pay are required to pay Apple 0.15 percent of each credit card transaction and 0.5 cents for each debit card transaction initiated using the Apple Pay wallet.
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