Merchant-Controlled Network Debuts Its Name But Leaves Many Questions Unanswered

The new mobile-payments network being developed by retailers went public on Wednesday with its name, Merchant Customer Exchange, or MCX, and the identities of 15 initial merchant-investors. But, five months after merchants first revealed plans to build an alternative to the major card networks as mobile payments take hold in the U.S., MCX has yet to hire a chief executive, reveal what technology it will use, or announce when it will go live.

A spokesperson for Irving, Texas-based MCX, however, says the CEO search is actively under way and that the network will have more announcements in coming weeks about that, the technology, and other issues. He also says more retailers besides the ones announced today are considering investing in the network. “There are many other high-profile merchants evaluating the opportunity with MCX right now,” the spokesperson tells Digital Transactions News.

The first three retailers to publicly link their names with the network back in March were Wal-Mart Stores Inc. and Target Corp., the nation’s No. 1 and No. 3 retailers respectively, and Alon Brands, a Texas-based regional franchisee of convenience-store chain 7-Eleven Inc. A source tells Digital Transactions News that Wednesday’s announcement is the result of enough merchants having signed on to meet the minimum number of participants necessary for the project to proceed.

The dozen new participants are: 7-Eleven; consumer-electronics chain Best Buy, drug-store firm CVS; Darden Restaurants and HMS Host, which operates airport restaurants; grocery chains HyVee and Publix, home-improvement retailer Lowe’s; department-store chain Sears; Michael’s, the crafts store; and petroleum companies Shell and Sunoco. MCX also has some other merchant owners that do not want their names disclosed, the spokesperson says.

The spokesperson would not say how much the founding companies are investing in MCX. The firm already has a “small full-time staff” working with “groups of experts” in the payments industry to set up the network, according to the spokesperson.

Mobile payments can use a number of technologies, including near-field communication (NFC), bar codes, and other systems. The spokesperson says MCX will settle on a system that will work for all of its diverse members. “It’s going to be away from a cash register in many instances,” he says, noting that gas stations will want a system that works at fuel pumps. MCX also is eyeing an e-commerce payments component.

In a news release, MCX said its application “will be available through virtually any smart phone,” implying that it will work on Google Inc.’s Android operating system, Apple Inc.’s various devices that use iOS, and other operating systems.

MCX, which will also support offers and rewards, faces big-name competition from systems either already in the market or close to introduction. Google Inc. recently revamped its Google Wallet service, which it began offering commercially nearly a year ago. Isis, a joint venture from three of the country’s biggest mobile carriers, says it will launch later this summer. PayPal Inc. in January began rolling out a mobile POS service for which some 15 retail chains have signed up. And last week Square Inc. announced it will supply its Pay with Square wallet service to Starbucks Coffee Co. at some 7,000 of the coffee purveyor’s stores.

Some experts say MCX may not have much time to get established. “They had better move fast,” notes Todd Ablowitiz, president of Double Diamond Group LLC, a Centennial, Colo.-based consulting firm. “The Squares of the world can move at light speed.” And while the 15-plus retail companies enlisted so far is an impressive roster, it remains unclear how much the merchant-controlled venture will appeal to other merchants and to banks and carriers.

Steve Mott, proprietor of Stamford, Conn.-based payments consultancy BetterBuy Design, points out that the merchants signed up so far have been involved with the project from the beginning. “Where are the [new] merchants?” asks Mott, who consulted for MCX in its early days but no longer has any connection to the service. Still, MCX may have some breathing room to develop. “Adoption takes a long time to happen, so they still have time, I think,” he says. “Now, if it’s a year-and-a-half or two years from now and they still don’t have a product, they’re dead.”

An executive with a large retailer told Digital Transactions News in March that the network’s owners want a secure, lower-cost alternative to the dominant Visa, MasterCard, American Express, and Discover networks as mobile payments develop. But it’s possible that MCX will have some type of link with the established networks. “They [network members] are open to working anyone in the payments universe,” the spokesperson says, adding that MCX will say more about its operations later. The release says MCX “intends to address the needs of financial institutions and merchants of all sizes to better serve consumers in the growing mobile marketplace.”

In other mobile-payments news Wednesday, USA Technologies Inc., the provider of wireless payment services for vending machines, moved beyond the vending niche with the introduction of its ePort Mobile service for retailers and other merchants. The service, now being tested with some undisclosed merchants, provides a card swipe for smart phones and tablets and uses Malvern, Pa.-based USAT’s ePort Connect platform to process credit and debit card transactions.

USAT is not requiring users to have their own merchant account. The new service’s pricing is in the form “of a simple, blended processing rate that takes the guesswork out of transaction fees,” the company said in a news release.