MCX – Doomed From Inception – Postpones Its National Debut As Walmart Pay Launches

Using a quote from the famous baseball player, Yogi Berra, to compare the current MCX to the former Softcard/Isis “It’s déjà vu, all over again.”

On May 16th, Walmart announced the launch of Walmart Pay in Texas, Arkansas and Oklahoma, with plans to launch nationally in late Summer 2016.  On the same day, MCX CEO, Brian Mooney, issued a statement that the effort behind the national launch of the CurrentC mobile wallet was being postponed and that it would refocus its efforts to support Chase Pay to be part of the revised CurrentC wallet.  In refocusing its efforts on the CurrentC wallet, MCX would also be reducing the size of its staff to reflect its more modest endeavors.  Abandoned by Walmart, and if rumors are true about an upcoming Target Pay, the withering away process of MCX has officially begun.

When the Merchant Customer Exchange, better known as MCX, was announced with great fanfare back in August 2012 it was with the proclamation that it would revolutionize the payment acceptance value proposition at point of sale (POS) for major retailers. The consortium backing MCX was a powerhouse group of retailers, bringing with it tens of millions of customers who would create a sustainable payments ecosystem, benefiting all participating merchants.  Among the companies standing behind MCX included Walmart, Target, Best Buy, Rite Aid, Lowes, Sears, Shell, 7-11, Michael’s, among several others.

The group would develop a merchant-owned, mobile-only payment system, to be called “CurrentC.”  It was intended to bring down the cost of merchant transactions at POS by circumventing the card networks, relying on the ACH system to transfer funds from consumers’ bank accounts to merchants’ accounts.  MCX was to develop and create a more captivating customer experience by enabling merchants to send customers discount coupons and engage them with loyalty programs, all through their mobile devices.  This was clearly a shot across the bow to the networks, card issuers and banks that merchants were going to develop their own payment network that would be centered around their needs and not for the benefit of someone else, notably the banks and card networks.

The reality was that MCX was doomed from the start because of three systemic problems.  These are the same three problems that plagued the wireless telco network payment scheme originally called Isis, later renamed Softcard:

  1. Lack of guaranteed scale.  Yes, MCX had millions of customers that shop at Walmart, Target, etc., as did Isis have millions of customers with AT&T, Verizon and T-Mobile when they were both announced.  However, there was no guarantee that Walmart customers would migrate to the CurrentC app as there was no guarantee that millions of Verizon customers would migrate to the Softcard/Isis mobile app.  Unless there is something in it for the customer, why would they need or want to change how they pay?  In the case of Softcard/Isis, using the phone to pay for things was not enough of a compelling reason to change payment behavior.  The advent of Apple Pay in 2014 put the final nail in the Softcard/Isis coffin.  (As a side note, the Telco venture named Isis, was announced in 2010, while the militant group ISIS was still known as Al-Qaeda in Iraq or AQI.  When AQI changed its name to ISIS in 2012, the Telco Isis ignored the alarming branding conflict. It was not until September 2014 before the Telco Isis changed its name to “Softcard, formerly known as Isis.”  It was already too late to have any effect as it shut down shortly thereafter and sold its technology assets to Google in February 2015.
  2. That old saying if it ain’t broke, don’t fix it.”  The current system of payment cards works quite well for millions of consumers AND merchants as a way paying for goods and services, managed by banks and enabled by card networks.  It is an efficient system that has been built over decades and proven to deliver value to merchants at POS, by efficiently enabling transactions and reducing risks.  When adding credit to mix, banks and the card networks enable merchant transactions, that would normally not be able to be conducted if cash, or the ACH equivalent were required.  The MCX solution to replace an existing, efficiently run payment card ecosystem was as foolish as the Isis telco venture set out to do the same.  Effectively, MCX was a solution seeking to fix a problem that did not exist.  It took Isis one year to realize this and backtrack on its mission by declaring it would accept credit cards in its wallet.
  3. Lack of value creation for participants at POS, aka Interchange.  It is ironic that the very thing MCX sought to destroy was the one thing that could have kept the consortium together.  The glue being interchange.  Think about it.  Since Walmart was the biggest player in the consortium, shouldn’t it be compensated when its customers shop at 7-11 or Shell?  If not compensated, then why should it share its customers with competitors such as Target, Michael’s and Rite-Aid. Those competitors could offer competitive coupons through the same mobile app, steering transactions from Walmart to Target.  How would this have benefited Walmart? Further, interchange allows compensation for fraud control, risk management, offering credit, offering rewards, etc.  It maintains the ecosystem and funds innovation.  Stripping the ecosystem of this value removes any economic benefit to participants, merchants and consumers, alike.

While MCX limps along, it has been largely abandoned by its principal merchant backers who have decided to launch their own apps.  In fact, some of the original MCX merchants who vowed they would block Apple Pay as a competitive payment form factor since it would compete with CurrentC have backtracked and now accept it, such as Best Buy in April 2015 and Rite-Aid in August 2015. 

While it is possible for MCX and its CurrentC wallet to turn the corner and be successful, it is more likely to head down the path already worn by the telco venture Softcard/Isis.

 

Author

About Michael Moeser

Michael is the JAVELIN’s Director of Payments. He advises clients on the rapidly changing payments industry. Michael is focused on tracking the evolution of the payments industry, covering specific areas such as person-to-person payments, U.S. and global EMV card migration, digital wallets, merchant acceptance of different payment forms, cross-border payments, real-time transactions, and digital payments.

Michael specializes in assisting clients in developing new payment products or repositioning existing services to capitalize on market opportunities, understanding how to market to particular consumer and small business market segments, and developing new corporate strategies that can transform an existing payments franchise.

Michael brings over 20 years of experience from the payments and consulting industries. Before joining JAVELIN, he led the international small business card portfolio at Visa, launching new and growing existing debit and credit card programs with banks and financial services companies across the globe. Previously, he was the Head of Competitive Intelligence at Capital One, a Payments Knowledge Expert at McKinsey’s Payments Practice, and the Head of Product Marketing at Ondot Systems, a Silicon Valley mobile card control startup. He has presented to audiences around the globe, primarily at Visa and McKinsey client and public audiences.

Michael holds a BBA in finance from the Ross School of Business at the University of Michigan and an MBA in marketing and entrepreneurship from the Kellstadt Graduate School of Business at DePaul University.

Stay in Touch!