No one, it seems, wants to miss the mobile payment revolution.
A new service — to be created jointly by Wal-Mart, Target and other retailers — could give customers an easier way to combine their digital wallet, instant coupons, gift cards and loyalty points in one app.
The announcement by retailers on Wednesday to create the Merchant Customer Exchange (MCX) is also a line in the sand drawn to remind banks, credit card companies, Google, wireless carriers and technology start-ups that they aren’t about to give up control of customers’ wallets without a fight. They also see the technology as a way to cut the fees they pay others for processing customer transactions. “Merchants are saying ‘How do we get in on this?’ ” says Jason Oxman, CEO of the Electronic Transactions Association.
Several competitors have a head start in this lucrative market. Worldwide mobile payments are estimated to grow 62% this year to $172 billion and could reach $617 billion by 2016, research firm Gartner says.
MCX, based in Irving, Texas, declined to specify a launch date or its technology. But its payment service will be available as an app on “virtually any smartphone” and initially focus on offers and promotions.
Other merchants in this network include Sears; Lowe’s; CVS/pharmacy; Darden Restaurants, which owns Olive Garden and Red Lobster; HMSHost, an owner of specialty and convenience stories at airports; grocer store chain Hy-Vee; Publix Super Markets; Shell; and Sunoco. Other retailers will be added in the coming months, MCX says.
Given several emerging technologies and the varying needs of the retailer partners, MCX has to be flexible, says Denée Carrington, an analyst at Forrester. “Can you imagine trying to pay with a phone at a (restaurant)? They need to be thinking about more than one (payment option),” she says.
Retail giant Target may consider using bar codes and/or the “near field communication” (NFC) that enables radio communication between phones and other devices that are in close proximity, says Terry Scully, Target’s president of financial and retail services. “We don’t want to isolate or back either one,” he says.
Creating a system based on barcodes may be easier, says David Stone, CEO of e-gift card company CashStar, which works with large retailers. “It’s cheaper and everyone understands it,” he says.
And not all retail partners may use one specific MCX app, says Mike Cook, Wal-Mart’s corporate vice president. “It could be an app, or it could be embedded in the merchant’s app,” he says.
Retailers also envision the initiative as a way to lower costs in paying fees to credit card companies and delivering promotions and coupons in traditional channels. “It’s a defensive measure against a number of players, and also a measure to lower the rate (credit card networks charge retailers),” Stone says.
Last year, Google launched Google Wallet, which works on NFC. Verizon Wireless, AT&T and T-Mobile are working on a competitor called Isis that may launch this month in Salt Lake City and Austin. Starbucks plans to expand its pay-by-phone options by joining with mobile payment start-up Square.
“There are a lot of things to solve. There is nothing broken about the swiping-credit card model,” Carrington says. “But the idea that there’s a group of merchants who are focused on the digital wallet solution is only going to add momentum in this marketplace.”
USA Today: By Roger Yu