Paul Martaus, Chief Executive Officer and President of the consulting firm Martaus & Associates Inc., said the Aug. 15, 2012, launch of the retailer-backed mobile payment technology company Merchant Customer Exchange could involve more than a mobile wallet.
Some of the biggest retailers in the country back MCX. They include 7-Eleven Inc., Best Buy Co. Inc., Lowe's, Sears Holdings, Shell Oil Products US, Sunoco Inc., Target Corp., and Wal-Mart Stores Inc. Together these retailers serve "nearly every smart phone-enabled American" and "account for approximately $1 trillion in annual sales," MCX stated in its inaugural press release.
MCX will initially focus on developing a mobile application that will integrate consumer offers, promotions and retail programs on nearly any smart phone. Retailers on board strongly endorsed MCX, for example:
MCX expects to gain more members in the coming months.
Martaus informally surveyed a number of his clients and industry contacts for reactions shortly after MCX released its news. He found a general belief that MCX is just another competitor in the hot contest to get consumers to use branded mobile wallets.
"They think MCX is really about the wallet and data and it doesn't want to get involved with issuing cards and processing transactions," he said. "They could well be right. What I keep in mind is that it's a small step between collecting data and controlling the ability to pay."
Martaus added that acquiring payment data is now more valuable than acquiring traditional payment fees, but the traditional payments industry is slow to build on its advantage. "Banks are in a perfect position to tell the retailer all about consumer behavior because they have a global look at all purchase behavior," he said. "But banks have zero imagination, and they are caught up in a decades old [system].
"The problem for retailers is that the purchase behavior they collect is only relative to the store. This means they have access to only a small portion of the overall purchase behavior. I don't know if MCX retailers will have access to each other's purchase data, but if they don't, they are missing something."
Martaus believes issuing cards (or account numbers) and processing transactions could be added to the MCX agenda quickly if that's what the retailers want to do. He pointed out that Wal-Mart looked at becoming a bank but gave it up because of the onerous regulation that went along with lending. "This MCX thing could evolve into something more interesting, and it could happen in a hurry," he said.
Martaus also said MCX is a way for a company like Wal-Mart to fight for the prepaid card business it's developed for its unbanked customers who might otherwise switch to the mobile network operators' Isis wallet or Google Inc.'s Google Wallet or some other wallet offering. "I see the wallet approach being the keys to the kingdom for them," he said. "I see a tremendous opportunity on the part of retailers to dramatically change the face of the game by applying intense competition in this area."
The key to payments in the future is developing relationships with consumers, and the MCX group is in a great position to do that, Martaus pointed out. "What does Isis bring the retailer?" he asked. "When you have retailers like Macy's, who are beyond proof of concept in payment technology and are implementing easy to use systems at every store, why not take it to the next step?"
Meanwhile, the payments industry has a problem: legacy platforms. These platforms are not easily adapted to rapidly changing mobile POS technologies brought to market by well-funded, hugely popular startup payment companies like Square Inc.
"You're asking people with legacy platforms to respond to technological changes nobody ever thought of when these systems were built," Martaus said. "To them Square isn't playing fairly because Square is taking advantage of a legacy platform that can't be changed. That's big stuff."
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