The ability to pay for real-world items through a smartphone, without cash or cards, is one of the tech industry's most promising revenue generators, if only someone could figure out the right formula. Nearly every segment of the American economy has spent the last few years figuring out how to take a slice of the mobile payments pie. Now a consortium major retailers hopes to grab a bigger portion - by elbowing technology companies from the table.
A massive partnership was announced yesterday between some of the largest retailers and merchants in the U.S. Going by the name Merchant Customer Exchange (MCX), the initiative includes 7-Eleven, Best Buy, Sears, Walmart and Target, among many others. MCX plans to create a mobile wallet that would be honored at its members' retail locations.
The official MCX announcement is short and vague. It does not have specifics of how the partnerships will deliver mobile wallet technology except that “the application will be available through virtually any smartphone.”
“MCX will leverage mobile technology to give consumers a faster and more convenient shopping experience while eliminating unnecessary costs for all stakeholders,” said Mike Cook, corporate vice president and assistant treasurer of Wal-Mart, in a press release. “The MCX platform will employ secure technology to deliver an efficiency-enhancing mobile solution available to all merchant categories, including retail stores, casual dining, petroleum and e-commerce.”
The MCX website does not offer any substantial information on the nuts and bolts of how the partnership will operate from a business or technology perspective. The site reiterates the press release and gives a list of the initial partners in the group.
The mobile payments industry is expected to be a $1.3 trillion segment by 2017, according to Juniper Research. That is a very large pie and nobody wants to be left empty-handed when mobile payments take off. Technology companies large and small were the first to start creating mobile payment solutions. Google Wallet and PayPal’s effort are the prime examples, but startups like Square, LevelUp, and Dwolla; mobile carriers (through an operation called Isis); payment processors; and banks all want a piece.
To a certain extent, the sheer number of industry sectors that must work together to make mobile payments take off precisely what is holding back growth. Everyone wants a cut and everybody thinks theirs should be bigger than everyone else's. Amid the quabbles among innovators, processors, and carriers, the merchants who constitute one side of any mobile payment transaction have been sidelined. With MCX, they are courting banks and payment processors to assert their own control.
It will be interesting to see how MCX takes shape in terms of how mobile payments and digital wallets are handled within retail locations. Will it be able to agree on one standard such as bar-code scanners, QR codes, or near field communication? What cut will banks and payment processors get? Who build the wallet app itself? None of the questions has an answer yet.
The merchants have drawn their line in the sand. We will see what happens next.