So there’s this mobile-payments thing. You can’t get it yet. It doesn’t work with your credit card. You have to scan something with your phone, or maybe the cashier scans your phone, or something. You have to give retailers your bank-account information. And it’s already been hacked.
Sounds great, right?
I’m talking about CurrentC, which is an attempt by MCX, a consortium of retailers, to create a new mobile-payments system that bypasses banks, phone manufacturers, and mobile operating-system vendors in an attempt to cut down on the fees merchants have to pay to accept payments.
MCX members include Walmart, Target, Kmart, 7-Eleven, and a host of others. The reason why we’re hearing about MCX is that it requires its members to foreswear any other mobile-payment system, including Apple Pay. CVS and Rite-Aid, whose payment terminals initially worked with Apple Pay, turned off access. (MCX confirmed its exclusivity requirement in a blog post, though it said retailers could leave the consortium at any time without penalty.)
Apple Pay uses NFC, a standard technology for tap-and-go payments, so it doesn’t actually need to have a deal with a retailer for it to work at a location with the right equipment. It’s understood that CVS and Rite-Aid took measures to block Apple Pay in order to comply with MCX’s terms.
If that wasn’t enough of a black eye, MCX’s systems were hacked, exposing CurrentC users’ email addresses. MCX claims no financial information was exposed and the CurrentC app wasn’t affected, but given its retail partners’ extremely poor track record with keeping customers’ financial information safe, we have little reason to trust the organization’s statements here.
This CurrentC Won’t Flow
So why would consumers want to use CurrentC? MCX says it will offer coupons and loyalty rewards. In return, we’ll have to give MCX our bank-account information.
This is a huge problem, of course. While consumers in Europe and other parts of the world are comfortable with sharing banking information to facilitate payments, U.S. consumers are leery about punching in bank account and routing numbers. (This attitude is especially bizarre considering Americans’ lingering fondness for paper checks, which display exactly the same information in the clear to anyone who handles them.)
While Visa and MasterCard offer zero-liability policies for credit-card purchases, there are few protections for people who allow merchants to tap their bank accounts directly.
Similar attempts have stumbled. Safeway, the grocery chain, isn’t a member of MCX, but it’s offered a bank-account-linked payment card called Fast Forward since 2013. It’s still only available in certain counties in California, and doesn’t seem to have gained much traction, despite Safeway offering discounts on gasoline purchases.
MCX cites the example of Starbucks as a successful, retailer-backed scan-and-pay system. But Starbucks is what’s known as a “closed-loop” system—it’s not a generalized payments tool. If something goes wrong, you can go to Starbucks. And you can reload your Starbucks Card account with a credit card: Starbucks is trying to make paying for your coffee more convenient, not less so.
So it’s pretty clear what retailers gain: The two or three percentage points off of credit- and debit-card transactions that they have to pay to processors and banks. They’d pay far less if they’re able to deduct payments directly from customers’ bank accounts.
It’s far from clear why consumers would be interested, save for the novelty of paying with their phones. Sure, they might be lured by discounts—but the truth is that retailers are competing against each other for lower prices and better service. How you pay is not a point of differentiation, unless you don’t accept a customer’s preferred payment method and they walk away leaving a full basket at the cash register.
My advice to MCX: Give up now. Your best bet may be to sell the consortium’s assets—chiefly the exclusive contracts with retailers—to someone like Google or PayPal.
No one’s going to trust retailers with bank-account information after the past few years’ of megahacks; the CurrentC email hack just reminds people of all the credit and debit cards they’ve had to switch out.
Photo by aisletwentytwo