MCX Implies Its Ready To Accept General-Purpose Cards, but Questions Remain

By Jim Daly

Attempting to do damage control in the wake of an email hack and unfavorable publicity about retailers who want to accept other mobile wallets, the chief executive of the retailer-sponsored Merchant Customer Exchange LLC (MCX) mobile-payments service said Wednesday that MCX is working with general-purpose credit card issuers for inclusion in its upcoming CurrentC network. But Dekkers Davidson left open questions about interchange and MCX’s relationships with the major card networks.

One of MCX’s founding tenets has been to escape the billions of dollars in interchange that its nearly 60 announced merchants, including Wal-Mart, Target, Best Buy, 7-Eleven and other national retailers, pay banks and credit unions to accept their general-purpose credit and debit cards. But Davidson, a former senior executive with a card-issuing bank, said MCX is working with issuers, and his remarks did not signal that MCX is about to radically change traditional revenue flows between merchants, card issuers and networks, which set interchange rates and also assess fees that issuers and merchant acquirers pay to them.

“We have arrangements now with two credit card institutions, and the fee structure is largely unchanged,” Davidson said at the Web- and phone-based press conference. “We’re not going to discuss the arrangement that we have between those credit card institutions, and we’re in conversations with many large issuers. We’d like to partner with as many large issuers as we possibly can.” He did say in regard to interchange that an MCX goal is “eventually balancing the payments ecosystem…a tertiary item.”

Exactly what arrangements MCX will have with the major card networks is unclear, but Davidson talked of more direct dealings between retailers and financial institutions. “We think this is a golden opportunity for merchants and banks to work directly with one another,” he said. “We have a lot in common with banks—merchants and banks have a great opportunity here to make it happen in mobile working together.”

Later, in response to a question about which card types consumers could load into their MCX wallets beyond store cards, he responded: “We will support private-label cards, the open-loop credit cards. We have made arrangements with already two substantial financial institutions and there will be more, so over time we expect all cards will be welcomed at CurrentC.”

Davidson’s responses indicate MCX is pursuing a strategy with some similarities to Apple Inc.’s, in which the iPhone and computer maker has signed deals with more than 500 financial institutions to include their cards in Passbook, Apple’s iPhone app that accesses its new Apple Pay service.

MCX is testing CurrentC in undisclosed locations with some merchants and an unknown number of consumers. Its system can access the user’s checking account. The initial technology, which besides payments supports loyalty programs, is a cloud-based Quick Response bar code system that works with Android and iOS devices. Only the iPhone 6 and 6 Plus smart phones work with Apple Pay’s NFC technology.

But Davidson and MCX chief operating officer Scott Rankin said MCX is open to other technologies. Apple Pay, Google Inc.’s Google Wallet and the Softcard (formerly Isis) mobile wallet all use near-field communication (NFC) for contactless, smart-phone-based payments. “We’re agnostic about technology,” said Davidson, adding that if needed, MCX “can pivot to NFC at the appropriate point in time.”

MCX found itself in an unwelcome media spotlight in the past few days when two of its members, drug-store chains Rite Aid and CVS, turned off NFC, apparently to disable Apple Pay and avoid violating MCX’s much-rumored exclusivity policy. In response, MCX posted on its blog earlier Wednesday a commentary addressing a number of issues, including confirmation that it indeed has a policy that requires members wanting to accept mobile wallets to accept only CurrentC. MCX, however, denied reports that it fines violators—but they have to quit MCX to avoid fines.

Davidson offered few details about the email compromise that MCX reported today in which cyberhackers obtained email address of some consumers either participating in the test or had signed up with CurrentC to stay informed about its developments, in addition to some test addresses. The hack occurred on the system of a third-party provider, which Davidson refused to identify, and did not affect the CurrentC app itself. The hackers also obtained some dummy ZIP codes.