After almost three years in development, the retail industry's answer to Apple Pay is finally getting off the ground.
A mobile payment application developed by Merchant Customer Exchange—a company founded in August 2012 with funding from Wal-Mart Stores Inc., Target Corp., and Best Buy Co.—has been tested by employees of the retailers and will get a limited trial run next month in stores, according to three people familiar with the situation. That means shoppers will soon be able to use the technology, called CurrentC, to pay for items with their phones.
The challenge for CurrentC now is playing catch-up against established apps from Apple Inc., Google Inc., and others, as well as explaining to customers why they should bother using it. When Apple Pay rolled out last year, CurrentC was derided by critics as a lower-tech alternative that retailers supported because it would give them tighter control over shoppers' transactions.
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Customers also will need assurances that the technology is safe, given the high-profile data breaches at retailers over the past few years, said Julie Conroy, a payments security analyst at Aite Group. CurrentC itself was hacked last year during an early test.
"Trust is going to be a huge issue for them," Conroy said.
Merchant Customer Exchange, known as MCX, expects to formally introduce the CurrentC app some time in the third quarter, a spokeswoman for Lowe's Cos., which is part of the consortium, said in an email. Lowe's, however, won't be part of the initial rollout.
Scott Rankin, MCX's chief operating officer, confirmed in an email that CurrentC will begin public tests this year, without being more specific. He also said MCX was "making good progress" on bringing the app to market.
"We expect there to be more than one successful player in mobile payments, and we expect to be one of them," said Rankin, a former executive at Staples Inc.
At stake is a fight over money and customer data. Retailers have long loathed paying fees to accept credit cards in their stores. That's led to battles on multiple fronts, including multibillion-dollar lawsuits and a successful lobbying effort that reduced fees in the 2010 Dodd-Frank financial reform.
Payments Network to Reduce Power of Credit Card Providers
Retailers started MCX to create a payments network that could reduce the role played by Visa Inc. and MasterCard Inc., as well as the fees paid to financial services. Dozens of other retailers are involved, including Sears Holdings Corp. and CVS Health Corp. and restaurant chains Wendy's Co. and Dunkin' Brands Group Inc. MCX has said its members operate 110,000 locations and process US$1 trillion in purchases a year.
Retailers worry that if competing options from Apple or Google take hold, they could lose valuable shopping and biographical data on their customers. For now, mobile payment hasn't been too widely adopted, so there's still time.
While MCX is getting closer to releasing its app, there are plenty of hurdles. It hasn't signed deals with major credit-card companies like Visa to use bank-issued card accounts within the app. That means a shopper wouldn't be able to use, say, a Visa debit card from JPMorgan Chase & Co. This can be done with competing products like Apple Pay. Instead, users of MCX's app will be limited to private-label store cards, like Target's REDcard, or they'll have to give MCX their checking-account details.
Competition in Mobile Payments
The mobile-payments field also has gotten increasingly crowded, with a range of companies working to make it easier for shoppers to make purchases with their smartphones. Apple, which released Apple Pay in September, recently expanded in the U.K. and has plans to launch in Canada later this year. Samsung Electronics Co. has announced its own product, and Google revamped its mobile-wallet service after scooping up rival SoftCard, a joint venture of three wireless carriers.
Another looming headache for MCX: The retailers involved signed three-year exclusivity agreements that prohibited other mobile-payment options. Those restrictions end next month, according to some of the people. In a sign of what might be ahead, MCX member Best Buy said in April that it would begin accepting Apple Pay in its stores later this year.
There have been management changes at MCX as well. In April, a day after Best Buy said it would accept Apple Pay, MCX announced it had named Brian Mooney as its interim chief executive officer. The former executive at Bank of America Corp. replaced Dekkers Davidson, who held the role less than two years.
"I'm increasingly skeptical of their chance to really make a dent," Conroy said.
–With assistance from Lindsey Rupp in New York.
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