A coalition of several large chain merchants, including retail giants Walmart and Target, are set to announce a new mobile payments network called Merchant Customer Exchange (MCX). According to the Wall Street Journal, the details are sketchy, but it does appear to be an NFC-enabled payments app. For a program that appears to attempt to make mobile payments more mainstream, does the reliance on NFC technology pose a problem?
In addition to Target and Walmart, MCX will reportedly include Sunoco, 7-Eleven, Best Buy, CVS, Lowe’s, Shell, Publix, Sears, and a few others. And according to the WSJ, it will work like this:
The technology relies on applications that a customer can download onto a smartphone and then make purchases in a store by tapping the phone against a reader placed by the cash register.
In other words: near-field communication, or NFC. Recently, NFC technology’s dominance of the nascent mobile payments space has been called into question by Square’s partnership with Starbucks. That company uses GPS technology — already built into most smartphones — to allow for contactless payments at point-of-sale. Simply open a tab and your face and name pop up on the screen, then you tell the cashier your name and you’ve paid for your coffee.
Walmart, 7-Eleven and Sears hardly have the urban cachet that Starbucks does. Sure, the coffee chain is ubiquitous at this point, but paying $5 for a coffee is still fodder for comedians and commentators who appeal to the Walmart crowd — where $5 goes considerably further. At 7-Eleven, $5 can probably buy you a gallon of soda, so who needs lattes?
The majority of the retailers mentioned in the WSJ’s story are value chains. They might be a few steps up from Family Dollar, but their primary aim to help their customers save here and there, and keep them coming back.
But NFC isn’t a very widely available technology just yet and it isn’t clear that it’s a totally secure payment method. For chains that offer value above all else, this is an interesting move: they’re requiring that customers move toward a short list of mobile phones to even be able to use the app. Not many phones are NFC-enabled, and most importantly the iPhone is not.
That said, the retailers do have a leg up on companies like Google, who simply don’t know yet how customers behave — though they’d very much like to. According to the WSJ, “By setting up their own system, the merchants in MCX also are counting on leveraging existing relationships with customers to get them accustomed to paying with a phone. Google and telecom providers know far less about shoppers’ buying habits than the merchants do, they say.”
Target knows when its customers’ lives are in flux — say, they’re pregnant — based only on their shopping habits, according to a recent New York Times Magazine story. Target is better poised than Google to offer the right sorts of deals through this new marketing channel provided by a mobile payments app.
The move makes sense, but NFC might pose a hurdle for adoption.