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When Apple Pay met MCX

October.24.2014 0 Comments


Watching the drama unfold between Apple Pay and MCX, I am reminded of the movie When Harry Met Sally. At the beginning of the movie, Harry and Sally meet but decide they cannot be together because of philosophic differences. The movie follows the couple’s back-and-forth tensions, all the while knowing they will eventually get over their differences and end up together.

In this case, the character of Sally, the high-maintenance girlfriend, is being played by MCX. Reading MCX’s announcement of their new CurrentC wallet, one cannot help but think of Sally placing a very precise and picky food order from an airplane attendant. MCX said, “CurrentC will offer customers the freedom to pay with a variety of financial accounts, including personal checking accounts, merchant gift cards and select merchant-branded credit and debit accounts” (but not a consumer’s usual credit and debit accounts). I could also draw a comparison to what will inevitably be the loud celebration of the lackluster rollout of CurrentC and the fake orgasm scene in Katz’s Deli, but let’s move on.

The character of Harry is of course played by Apple Pay. Like Harry, Apple Pay is amusing and very easy to deal with (at least for consumers). Both Harry and Apple Pay spend most of their time dating around with partners who are nice but ultimately unfulfilling, dropping a few good quips here and there. However, throughout the movie you know that Harry needs a partner who, while demanding, turns out to be the one who ultimately complements and fulfills him. Of course (spoiler alert) the movie has a happy ending with Harry and Sally ending up together.

This ending of course leaves at least some people asking the ultimate question – “Did I have to spend $40 in popcorn and soda and waste two hours of my life to get to an ending I could have predicted when I bought the tickets?” MCX’s CurrentC is not going to be successful without Apple’s distribution. Consumers don’t want additional payment cards and it will be costly to get them to give up their points programs. They also don’t want to turn over their personal bank account data to merchants who seem to lose sensitive data to fraudsters every couple of months. Moreover, MCX’s approach to acceptance, scanning a QR code at checkout, has several risks including dependence on consistent associate training and technical issues such as data connectivity at checkout. The chance of this being a homerun out of the gate is low.

Likewise, Apple Pay needs MCX. Acceptance is the single biggest challenge facing mobile wallets and timing matters a lot. Merchants are getting ready to upgrade terminals in anticipation of EMV next year. If MCX merchants go down the path that 7-Eleven has recently chosen – i.e., providing terminals with a slot for chip-based credit cards but no place for mobile NFC acceptance – it could be a serious and long-term blow to consumer habituation of mobile wallets.

The solution? There needs to be compromise, but ultimately Harry (Apple Pay) needs to capitulate to the demands of Sally (MCX). What does that mean for Harry?

  • Host and help drive sign up for CurrentC credentials. Credit card issuers and networks won’t be thrilled, but it is a compromise they need to make. Apple has the distribution, consumer trust and (in some cases) data to more easily sign up consumers for MCX credentials.
  • Enable (limited) location-based, push promotions for merchants. MCX merchants want to promote the benefits of using its credential in their stores. The best way to reach tech-savvy consumers in-store is via their mobile phone. Of course, this has to be subject to restrictions (e.g., consumer opt-out, limited messaging, restrictions on spam) but could be done in a way that benefits both consumers and retailers.
  • Leverage data as an asset. The Apple Pay announcement left open some serious questions about what data merchants would receive, given its encryption solution issues single-use tokens with each transaction. Apple Pay needs to work with its broader ecosystem to ensure retailers not only continue to receive the data they have now, but enhance it further.
  • Provide other value added services to merchants. There are a broad array of services that Apple could provide merchants via Apple Pay. Examples might include advanced data analytics, location-aware promotions using iBeacons, and help closing the loop in multi-channel advertisements.

In return, MCX will need to admit that holding out on mobile wallets is unlikely to result in any significant, broad-based reduction in interchange rates since most of that goes to pay for points programs, not fraud reduction. MCX’s best bet for lowering its cost of acceptance is to stop pretending it doesn’t care about Apple and to start figuring how they can work together. Hopefully they can do this quickly and save us all the cost of the popcorn.