February 12, 2014 |
Today MCX (Merchant Customer Exchange) announced it would be adopting the Paydiant mobile wallet, a cloud-based, white label platform. MCX is a consortium of 70 prominent brands with 110,000 locations representing over $1 Trillion in annual payments volume and 700,000 loyalty cards. MCX includes companies like Wal-Mart, Best Buy, CVS, Bed Bath & Beyond, Target, Exxon, Southwest, and today it extended to QSRs like Wendy’s. FIS, rated Javelin’s Best in Class Mobile Banking Vendor provides MCX with payment processing, routing and settlement for mobile commerce transactions. The merchant coalition formed as it became clear that the existing merchant position might be disrupted as platforms switched to mobile payments. MCX wants to make sure that merchants have a say in controlling 1) their costs and 2) their data, which could be considerably altered under a new mobile wallet (Refer to Figure). Increasingly valuable transaction data that currently flows to the merchant could be cut off, hidden, and aggregated. Interchange and other costs may rise as new players ( mobile wallet providers , mobile network providers, TSMs, etc.) are added who want their own cuts of the transaction.
Traditional Payment vs. Mobile Wallet Disruptor Model – Costs and Data will be Disrupted
The Paydiant mobile platform is based on a bar code, cloud platform. For a full review of the offering, please refer to the FIS-Paydiant at SEFCU whitepaper which details the strengths and weaknesses of the platform. Along with being the merchants’ provider, Paydiant is the banks’ choice of wallet provider. FIS, Javelin’s Best-in-class Mobile Banking Vendor, provides a white label mobile wallet with Paydiant. The CU wallet (credit union wallet) selected Paydiant as their provider. Pulse debit and ATM network announced they were working with Paydiant to give banks a white-label wallet. Bank of America has also conducted trials with Paydiant.
To control costs, MCX also seeks to limit mobile wallets deployed in its stores to just its own wallet app. But in the long run this will be difficult to regulate as it is the consumer that will likely dictate the ways that they will pay. However, because merchants control the POS in store, the coalition can be used to block widespread adoption of any proximity based mobile wallet app. Its $1 Trillion in annual payments processing, which accounts for over 25% of retail payments, will give MCX good leverage to negotiate with any wallet provider that begins to gain consumer acceptance. For now, the primary bank and credit union hold the top position among consumers who desire to use a mobile wallet, while the merchant coalition MCX is in 11th place, trailing far behind such competitors as PayPal, MasterCard, Visa, Google, American Express and Apple. MCX will have to market itself heavily to consumers if it truly wants to capture the market. Remaining unsaid is that a bank-merchant coalition, traditionally hostile to each other, could capture both ends of the market–consumer and merchant.