Dekkers Davidson sounded about as frustrated as one could be given the situation Wednesday afternoon.
The Merchant Customer Exchange CEO found himself bombarded with questions during a virtual press conference with reporters who asked him about the retail consortium’s business model with the mobile wallet CurrentC as well as the email hack the company revealed earlier in the day.
Davidson defended MCX’s plan with CurrentC, but danced around questions related to the relationship the consortium has with its merchant partners in the aftermath of CVS and Rite Aid turning off support for NFC-enabled mobile payments (most notably Apple Pay) at its stores. Davidson said those merchants acted with their customers’ best interests in mind.
“Merchants makes their own choices about MCX and about other forms of payments,” he said. “Those merchants have spent time and money on a system [they’re invested in].”
He deflected questions about Apple Pay back onto the retail partners.
“The merchants have made a choice based on consumer engagement, not technology,” he said.
At the heart of the current issue is the exclusivity contract merchants sign to become an MCX merchant. Retailers such as CVS, Rite Aid, Target and Walmart cannot accept other mobile wallets for payment at their stores. Davidson denied previous media reports that merchants face a fine if they leave MCX, but did reveal those partners invested significant amounts of money and time into the system to stay the course and accept only CurrentC.
Davidson noted multiple times during the 30-minute presser that merchants want a mobile-wallet system that enables them to communicate with customers. He stressed CurrentC users will control their level of engagement with merchants despite media reports that indicated merchants would have too much access to personal information. Multiple tech sites published screenshots from the app that showed a dashboard indicating health information was one of many categories users could choose to share with merchants.
“Some users will prefer to be anonymous at different points [of their interactions with merchants],” he said.
Much has been said and written about MCX and CurrentC since CVS and Rite Aid pulled support not only for Apple Pay, but other NFC-enabled wallets such as Google Wallet and Softcard. Apple supporters bombarded social media last weekend when it was revealed CVS pulled NFC support just days after Rite Aid did the same. The pharmacies were never official Apple Pay partners, but the system worked at their point-of-sale terminals because they accepted contacless card payments.
MCX posted a blog entry Thursday morning to clarify CurrentC’s business model. A few hours after MCX published the entry, the company notified beta users its email partner had been hacked.
Davidson did not the reveal the company in question, but said the hackers obtained access to some testers’ email addresses and what he described as “dummy zip codes.” He said the CurrentC app itself was not hacked and maintained the mobile wallet meets and exceeds industry security standards.
Davidson said CurrentC is still scheduled for an early 2015 national rollout despite the setback. He noted the company’s system was attacked often during the past 10 days. When asked about what prompted the attack, Davidson said it was because MCX is doing something different in the market.
“MCX is challenging the status quo to a $500 billion ecosystem,” he said. “We’ve expected attacks and there will be more to come.”
Davidson continued to insist MCX’s creation is not about interchange rates, but the payments industry knows better.
“The purpose of MCX has always been about merchants’ antipathy to the card networks,” James Wester, research director of global payments for IDC Financial Insights, told Mobile Payments Today in an email. “They have been on a decades-long crusade to lower costs and level the playing field with companies they feel have arbitrary, opaque pricing. That fight has included lawsuits and regulations and has been extremely hard fought by both sides.”
Mobile payments represents a possible answer to the merchants’ problem, but MCX finds itself in a difficult situation despite its best efforts.
“Unfortunately, MCX is learning what the wireless carriers learned when they launched Isis four years ago: The process of creating a secure, scalable payment scheme is easier in theory than practice,” Wester said. “Payments are hard. By completely excluding the card networks, MCX is forced to build their infrastructure themselves. The card networks took decades to build out their capabilities. That’s why Apple and Google have been smart to work within the system. But to MCX, working within the system is simply propping up a status quo they dislike.”
On paper, MCX still has a value proposition for consumers to use CurrentC and that is discounts and rewards. Starbucks built a legion of loyal mobile app users thanks to it rewards systems. A company such as LevelUp, which uses QR code-technology to enable payment with a mobile device, positions itself as a loyalty company first. MCX is not the first mobile wallet provider to follow this particular path.
“And I’m not writing MCX off just yet,” Wester said. “If MCX can deliver an excellent user experience—which includes adequate security and privacy guarantees—they may yet do ok. Admittedly, that’s a big if, but they do control a trillion dollars in annual transactions as well as a direct relationship with consumers. And some even have strong loyalties from their customers.”
Davidson revealed some notable tidbits about CurrentC’s future.
MCX will add credit cards as a funding option for the mobile wallet and the consortium already is in discussions with two networks. Davidson also mentioned it is working directly with issuers.
“This is a good opportunity for merchant and issuers to work together,” Davidson said.
Richard Crone, CEO and founder of Crone Consulting LLC, suggested such a thing could happen in a a recent interview with Mobile Payments Today.
Davidson also did not rule out NFC, or a situation where Apple Pay is also accepted at MCX merchants. He said the consortium chose QR-code technology so that it can be as widespread as possible with retailers and work with different smartphone models and operating systems. He also mentioned MCX retailers want to experiment with Bluetooth Low Energy technology as well.