Merchant Customer Exchange, the retailer-controlled mobile-payments network, took another step toward launch on Wednesday when it announced a deal with Paydiant Inc. to use the startup wallet provider’s technology at member merchant locations.
Dallas-based MCX also said Wendy’s International LLC, the hamburger chain, and regional grocery chain Acme Fresh Market have joined the network, which, though not yet operational, includes merchants accounting for about $1 trillion in payments annually, according to MCX.
The deal with Paydiant represents a major step forward for both companies, sources say. “It’s a big deal for us,” Chris Gardner, a cofounder of Wellesley, Mass.-based Paydiant, tells Digital Transactions News. “MCX represents roughly one-third of U.S. payments volume, so they certainly represent critical mass.”
While MCX officials were not available to comment beyond the company’s press release, one expert observer says the deal should help the 2-year-old organization realize its ambitions to cut transaction costs from the major card networks. MCX has not yet announced when it will begin processing transactions. “This [deal] is really significant,” says the expert, who asked not to be identified. “It’s a brilliant way for [MCX] to enter the market.”
Paydiant, whose biggest client up to now has been the Subway sandwich chain, provides technology that allows smart-phone users to pay for goods at the point of sale, typically by generating a bar code linked to payment credentials stored on cloud servers. Paydiant offers the technology on a white-label basis and offers application programming interfaces (APIs) to ease integration for retail operations.
Using these APIs, merchants can offer mobile wallets and run Paydiant-derived transactions without changing out existing point-of-sale equipment, establishing a so-called front end for MCX. On the back end, MCX could use its relationship with Jacksonville, Fla.-based processor Fidelity National Information Services (FIS) and its new PayNet system to run settlement with financial institutions holding users’ accounts, the expert speculates. He expects MCX to exclude the major card brands from its wallet and rely on proprietary payment “cards” linked to the automated clearing house network.
Another mobile-payments expert, James Wester, says by email that Paydiant’s own links to FIS could also come into play. “It\'s one of those announcements where everything makes sense for all parties,” says Wester, research director for global payments at IDC Financial Insights. “Paydiant has quietly built a very smart white-label solution. It fits well with what MCX is trying to accomplish and pushes that effort forward as they try to go to market.”
The deal with Paydiant, however, is not exclusive on either side, says Gardner. “This space is moving too quickly” for exclusive tie-ups, he says.
Founded partly in reaction to large merchants’ dissatisfaction with major-brand card-network costs, MCX has had a long gestation, but now appears to be gearing up for a launch. Some observers, indeed, had thought until recently the joint venture was chiefly meant to serve as leverage to wring pricing concessions out of the card networks. “I thought this [MCX venture] was all a head fake, but it appears they’re actually building it,” says the mobile expert.
In July, MCX hired former Barclaycard US executive Dekkers Davidson as chief executive and since then has added a number of major retail brands. So far, some 59 companies from a variety of retail categories are listed on its Web site, including the latest additions of Wendy’s and Acme, with the implication that the consortium includes other merchants not listed. MCX reportedly requires member merchants to commit exclusively to its wallet, effectively walling off major retail companies from competing mobile-payments ventures.