Four years after it was founded by a consortium of mega retailers, Merchant Customer Exchange (MCX), revealed that on June 28, 2016, it would end the beta test for its CurrentC quick-response code-based mobile app. CurrentC was conceived as an independent mobile payment system that would be independent of the traditional card rails.
Many view MCX's recent change in focus as a logical shift in direction. "The key here is that they were plagued from the start by bringing competitors together that didn't share or play into each other's self interests," said Richard Crone of Crone Consulting LLC. However, Crone noted that from every angle that he observed as a mystery shopper, the CurrentC pilot was successful – the lone exception being user interface weaknesses early on.
Crone said that while a standalone, branded wallet did not play into the self interests of individual MCX members, developing an open cloud-based common acceptance platform does. "They've used that to cut a deal with Chase Pay, which when it launches, will be a seminal moment in payments because they will have accomplished the goals that every retailer has for payments," Crone said.
He noted that for merchants, the benefit of reduced costs through fixed pricing and an earned quantity discount schedule, the ability to collect data, and improve the customer experience are all very attractive value propositions. "They go to the merchant; there is no network fee because they're not going through Visa and MasterCard for these transactions, because in 2013, a deal was cut with Visa to use ChaseNet to process those on-us transactions," Crone said. "There will be zero merchant processing fees, and because Chase Pay is more secure – it's cloud-based with multifactor authentication – there will be zero merchant fraud liability as well."
For MCX, the arrangement with JPMorgan Chase could mark the beginning of a long awaited avalanche of participation. Other financial institution and payments entities will likely follow suit. "If you have the single greatest value proposition with the single largest issuer with half of the market, doing anything else but this is a fatal distraction," Crone said about MCX's current focus.
Crone believes the MCX-Chase Pay model is less about losing interchange and more about gaining new revenue streams from the data, ads, offers and new service possibilities the new platform affords. Instead of depending on overdraft, interchange and other fees for generating an average $150 per account in gross annual revenue, banks could potentially earn up to $300 per year per active mobile wallet using a value-based model that more resembles the revenue models for Facebook and Google Inc.
"It's not about payment," Crone said. "This is about data and having access to the consumer in context to deliver the service because they're not getting a loan; they're buying a car. They're not making a payment; they're shopping. If you can reach them at that point of present, in context of the need, then you can develop a whole new set of services that we haven't dreamed of today that will be possible through mobile devices."
Not only does Chase have clout as a financial institution with an estimated 94 million accountholders, its Chase Paymentech merchant acquiring arm completes the financial services picture in almost monopolistic fashion, something competitors should note, he said.
Another major player to watch is Wal-Mart Stores Inc., which, as a founding member of the MCX, also launched its own mobile app. "Walmart Pay, though it isn't using the MCX API, works and acts exactly like the CurrentC app did," Crone said. "They copied it. That's the biggest form of flattery. This cloud-based approach gives them the most flexibility."
He described a scenario in which a customer with Chase Pay could conceivably walk into a Wal-Mart store with a shopping list, prescriptions, and everything else the customer needs visible and navigable through the Walmart app. But the mega retailer is not content to stop there. Wal-Mart Canada Corp. stated on June 11 that starting on July 18, it would no longer accept Visa card payments in Canadian stores, another bold move to counter hefty card fees.
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