May 23, 2016
TABLE OF CONTENTS
There were no shortage of articles last week lamenting on the fact that MCX is as good as dead given their recent announcement of employee layoffs and “shift in direction.” It’s an easy conclusion to arrive at and it may very well be that MCX has breathed it’s last breath and becomes another consortium discarded on the road to mobile payments ubiquity. Maybe. However, I can’t help but wonder if there is an alternate storyline for MCX.
Despite the failure of their initial plans, MCX still has something critical to offer banks who want to release their own mobile payment capability – a network of merchants that provide acceptance. This is obviously what Chase saw in MCX when they announced the Chase Pay link up with the consortium, and Chase isn’t the only bank with aspirations of offering their own “Pay.”
Currently, if a bank wants to release their own mobile payment capability, they have two choices. The first is to just build the feature on Android using HCE or the new Android Pay APIs. This gives the bank complete control over the experience; however, it only addresses a portion of their mobile users (and at most banks it’s the smaller portion of users, as iOS has a stronger user base). The second is to utilize a QR solution. This enables them to build for iOS and Android and provide a similar experience on both. There is one problem with that approach though – QR code solutions require the merchants to incorporate the technology needed for acceptance. Frankly, this is the challenge wallets like LevelUp and Paydiant always had and not that different than what Paypal is facing today. Getting merchants to implement new technology at the Point of Sale for a portion of their customers is nearly impossible.
Unless… major merchants banded together to form a consortium that agrees to accept a specific payment technology for both their own apps and the banks they partner with. That is where I think MCX may still have a chance if they have the management and operational capability to execute on it. In turn, MCX can ask for a 5-10bps discount on interchange to support a point of sale experience that they can also capitalize for their own app. Similarly, MCX can continue to offer the same APIs and technical capabilities to member merchants that wish to build a mobile payment experience, but don’t have the resources of Walmart or Target to execute it themselves.
From the bank perspective, why not give up 5 or 10bps to enable your digital wallet to work at a large number of merchants? You are already paying Apple 15bps and you have no control over experience. Seems like a pretty easy deal for banks to get comfortable with and could be added on top of NFC capabilities for use at non-MCX merchants.
Ultimately, the fate of MCX will depend on how invested the group remains in their desire to leverage their size ‘for the good of all’. If the major merchant members already got what they needed out of the effort or no longer believe in the vision, then this is probably the end of the story for MCX and not just the CurrentC app. However, if they believe there is still more to achieve, then it may not be the death of MCX that everyone is so quick to declare.
Chief Strategy Officer
Scott Harkey is Levvel's Chief Strategy Officer while also leading the Payments and Financial Services work. He has 15 years of banking experience including leading the technology team that implemented digital wallet products at Bank of America along with 10 years of technology merger integration and IT operations outsourcing work at Wells Fargo. Scott brings a unique “insider” point of view combined with a proven track record of delivery to banks, technology providers, and merchants exploring the digital payments space.
In 2019, we participated in the RTP Buildathon, sponsored by The Clearing House, Oracle, Yodlee, and The Carolina Fintech Hub. Our task was creating a compelling use case for leveraging the RTP rail and building a working prototype to demo our idea.
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