We’ve been hearing a lot recently about the demise of MCX, brought on by the May 16 announcement that the organization will postpone the launch of the CurrentC app to focus on deals with financial institutions, like the one it has struck with Chase. While this move is clearly a pivot for MCX, it’s way too early to call the organization dead. In fact, we should be calling MCX a roaring success.
Originally, MCX had two goals:
- Build a universally accepted, merchant-controlled digital wallet.
- Build a new payment network, connecting merchants directly to financial institutions while circumventing Visa and MasterCard.
Since Google Wallet launched in 2011, Apple, American Express, Discover, Google, Isis/Softcard, MasterCard, PayPal, Visa and others have tried and failed to launch an MCX competitor and universally accepted digital wallet that makes mobile payments compatible with our legacy, card-based infrastructure. Those solutions have generated huge publicity and costs to their organizations, but minimal actual results. Some have been colossal failures; others are limping along.
In the meantime, a multitude of merchant- or marketplace-branded and controlled mobile payments solutions have flourished, including Starbucks, Uber, Groupon, Amazon and Dunkin’ Donuts, to name just a few.
The rest of the field already has proven that investing in a universally accepted wallet is like burning your money. MCX’s own efforts thus far have further supported this notion. MCX members, including Walmart and Target, two of the most important MCX members, have realized that the momentum lies within single-merchant wallets, and therefore have chosen to build out proprietary solutions. Since the universally accepted wallet doesn’t appear to be anywhere on the near-term horizon, MCX merchants can focus on proprietary wallets and delay investments in a shared solution. For MCX, this is far from a defeat; rather its recognition that mobile payments trends are playing right into the members’ collective hands and that further investment in a universally accepted wallet appears fruitless.
At the same time, MCX’s efforts to build a new payment network have yielded a deal with Chase, the largest bank in the U.S. This is a massive accomplishment for a nascent payment network. The deal with Chase is the key enabler for proving the value of the new network. If the collective organizations can work together to build a solution that benefits all parties involved, they can demonstrate the value of direct merchant-to-financial institution relationships and create a model that can be replicated across more and more banks. What better model for success can there be than one that pairs the largest bank with the largest merchants into a direct and synergistic relationship? By focusing on the relationship with Chase, MCX is directing its efforts toward the highest potential initiative that any nascent payment network could possibly hope for.
The largest success story among payment network launches since Visa and MasterCard has been Discover, which was launched similarly in a pairing of Sears with its financial subsidiary, Dean Witter Financial Services Group. The paring of MCX and Chase is orders of magnitude larger. Thus far, MCX has constructed a foundation that is greater than that of the most successful payment network startup since the 1960s, and it is pivoting away from a proven financial rat hole in order to focus on higher value activities, so why, exactly, is anyone calling this effort a failure?
Rick Oglesby is president of AZ Payments Group LLC, a research and consultancy firm focused on helping payments firms achieve market differentiation. He can be reached at firstname.lastname@example.org. This article is adapted from http://azpaymentsgroup.com/blogg/mcx-lost-battle-not-war/.
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