You’re either in or you’re out of MCX’s mobile payments club. Here’s why retailers are staying in

MCX has been in the news a lately a lot more than it probably wants to be. Instead of making news with CurrentC, the mobile payments system it plans to launch nationwide next year, the company been making headlines about the competing mobile wallets it won’t support.

MCX (which stands for the Merchant Consumer Exchange) took to its blog Wednesday morning to explain its policies and its reasoning, confirming in the process what had already become apparent: Retailers that participate in MCX are banned from using any other smartphone payments method, whether it’s [company]Apple[/company] Pay, [company]Google[/company] Wallet or Softcard. And that list of participating retailers is a long one, including [company]Walmart[/company], [company]Target[/company], [company]Best Buy[/company], [company]CVS[/company], [company]7-Eleven[/company] and dozens of other big restaurant, pharmacy and retail chains.

Image: Shutterstock / Sinisa Botas
Image: Shutterstock / Sinisa Botas

MCX said that any merchant is free to leave, but they’re either in or out. If a merchant leaves the program, it will pay no fines and it is free to accept whatever mobile payment system it desires – just not CurrentC.

A fragmented retail market

That policy created some pretty weird situations over the last few months. Last week saw RiteAid and CVS start accepting Apple Pay payments because their new point-of-sale terminals and bank partners were perfectly capable of processing the transactions. MCX’s guidelines made them stop, effectively disabling near-field communications in their terminals completely (CurrentC will use QR codes to trigger transactions).

Target is in the odd position of both supporting and banning Apple Pay, depending on where you make your purchase. Go to the Target app and you have the option of a one-click purchase with Apple Pay. But go to a bricks-and-mortar Target store, and your iPhone might as well be a brick for all the good waving it front of the cash register will do. Before Apple Pay launched, we saw Softcard (then known as Isis) engage in similar skirmishes with MCX members Best Buy and 7-Eleven.

Image: Softcard
Image: Softcard

MCX may represent many of the biggest retail chains in the country, but it doesn’t have all of them. On Tuesday [company]McDonald’s[/company] announced its support for SoftCard, meaning you can now buy a Big Mac with all three major NFC-based payment apps, including Google Wallet and Apple Pay. We’re starting to see different merchants in various retail sectors take sides.

CVS is with MCX, Walgreens is not. [company]Wendy’s[/company] is in the MCX camp while McDonald’s and [company]Subway[/company] sit outside of it. If you gas up at [company]Texaco[/company] or [company]Chevron[/company] you’re free to use Apple Pay, but if you buy your fuel at [company]ExxonMobile[/company], you’ll have to wait for CurrentC to pay with your smartphone.

Oddly, the Meijer supermarket chain is listed as an MCX member but is still accepting Apple Pay. In an interview with mLive, Meijer executives said the chain has no plans to abandon Apple’s wallet. I imagine MCX will take exception to that statement. If [company]Meijer[/company] is free to play both sides, then other MCX members could as well.

At a press conference MCX wouldn’t reveal how it’s enforcing its ban on other mobile payments services, except to say it isn’t fining members who support other wallets, though the New York Times interviewed sources saying MCX did exactly that. FierceWirelessIT reports that MCX members are bound by three-year exclusivity deals, and given that MCX first came to the public’s attention in 2012, so some of its founding members may no longer be bound by that exclusivity provision.

What we could be seeing is a revolt among some of MCX’s smaller members uncomfortable with the predicament they’ve been placed in. But overall MCX seems to be keeping a mutiny in check as Rite Aid and CVS’s recent capitulation demonstrates.

Why is MCX closing ranks?

We have the makings of a classic turf war here, and this one is being fought on two fronts. On the one hand, MCX is battling the major credit card companies like Visa and MasterCard. CurrentC’s primary payment mechanism is direct withdrawal from a bank account, which bypasses the hefty fees that card processors charge. To effect that kind of change in the retail world, MCX not only needs the backing of big retail players, but also solidarity among its members.

Passbook on the iPhone loaded with Apple Pay cards (Courtesy of Apple)
Passbook on the iPhone loaded with Apple Pay cards. Image courtesy of Apple

On the other hand, MCX is battling Google, Apple and the carriers for control over the mobile wallet. In its blog post, MCX confirmed CurrentC would eventually store credit cards as well. So this isn’t a question of supporting traditional credit payments, but of which middleman is enabling the transaction. MCX wants that middleman to be the retailers, Google wants it to be Google, Apple wants it to be Apple and Softcard wants it to be the carriers.

You may recall that Isis/Softcard started a similar battle with Google when it launched Wallet, and the only thing that accomplished was a huge delay in mobile payments adoption. As Gigaom Research’s Colin Gibbs points out, these kind of protectionist policies don’t do anyone because frustrated consumers have an easy fallback.

“Despite CurrentC’s potential advantages, users won’t embrace any mobile payments scheme that is less convenient than using credit cards or cash at the point of sales,” Gibbs wrote.

The CurrentC app hasn’t even gone beyond limited pilots yet and MCX is already fighting a big PR battle. MCX will get painted as the villain, just as Isis became the villain several years ago when carriers started blocking Google Wallet. Just like Isis, MCX is preventing consumers from using competing wallets already on the market, while its own payment alternative isn’t even available. And MCX wasn’t helped by the revelation from Wednesday that the its email provider was hacked and email addresses for CurrentC pilot testers were taken.