On Aug. 15, 2012, a group of retailers representing $1 Trillion in purchasing power announced that it was banding together to create its own, merchant-centric payments network.
MCX was born.
Driven by a desire to control their own payments destiny and lower their cost of payments, these merchants put forward a mobile-first payments scheme that would enable consumers to establish an MCX account, use their mobile phones to pay at member stores and contractually exclude others from having a mobile payments scheme accepted at member/owner stores.
Almost three years to the day later, MCX has gone through two CEOs, several “private betas,” a number of very public “kerfuffles” over inadvertent Apple Pay acceptance by member merchants with NFC terminals, a data breach, and a number of high-profile defections including Best Buy, Target, and, more recently, Rite Aid.
But, just yesterday, MCX finally announced a public beta, to be launched later this month in Columbus, Ohio — giving its mobile payments product, CurrentC, an opportunity to be tested across a variety of merchants with store locations there.
On the occasion of the announcement of that launch, I sat down with MCX CEO Brian Mooney to ask him a few of the tough questions that were on my mind, and probably yours, too.
What follows is a transcript of our conversation.
KW: Here’s my first and probably very obvious question: What’s taken so long? Why has it been three years to get a pilot announced and launched?
BM: We’ve been working hard on our product. As you know, we’ve been in private beta for a while and we are going to go live in the next few weeks. We’re going to expand to a public facing beta in Columbus, as I’m sure you’ve heard. Certainly, it is a lot of work, and we’re proud about the work we’ve done.
You know, the first private beta was back in September of ’14 and we’ve been working since then, getting feedback and we’re looking forward to getting into Columbus and getting more feedback from consumers and merchants about what they like or don’t like and how to make the product better.
KW: Why Columbus?
BM: Columbus is a good sized city with a strong population, a strong technical base, a very well-educated population, and so we think it’s a great market for us to address and do the public beta with. It’s also a market in which many of our merchants have locations, so this is where we can test multiple verticals with multiple merchants in one market.
KW: Let’s talk a little bit about some of the things that have made news around MCX and CurrentC over the last several months and that is related to the exclusivity clauses that were part of the original contract three years ago. My sense is that the exclusivity clauses were designed to create a barrier to entry — give the product enough time to get some heft and users around it so that you could create your moat. The alternative approach would have been to create a smaller version of the product, get it out, get consumers using it, and then scale it from there, using the consumer base and the base of experience as a barrier to entry, instead of having to rely on contractual clauses to do that. What are your thoughts on that?
BM: My thoughts are that today we know the exclusivity is going away. We’ve been very open about saying that we think there are going to be two or three major players, maybe a few more, in the marketplace going forward and we fully believe that CurrentC and MCX will be one of those major players. You know as the exclusivity clauses roll off we’re looking forward to being in the marketplace with our merchants, looking forward to helping driving a solution that they will endorse and consumers will endorse. So at this point we’re looking forward, not looking backwards.
KW: Is the product any different today than it was when you did your first private beta in September ’14, and if it is different, how is it different?
BM: We have received feedback from our merchants, from their employees and customers and have a good understanding of what works and what doesn’t work. We have more forms of payment today than we had when we initially started. We have more loyalty programs and value-added services in the product than we did when we started. A new user interface will be reflected in the product coming out, so we think we’ve definitely improved the product. That’s really one of the basic key things we are trying to get out of going to Columbus, more feedback about what we can do better.
KW: Let’s talk a little bit about structure. I had the occasion to visit with the CEO of Plenti last week and we were chatting about what it’s like to get a group of merchants together to collaborate around a common product. He talked a lot about how having competing merchants as part of that program was a non-starter. That’s not the case with how MCX is structured and how the CurrentC product will work. What’s different about what you’re doing that makes competing merchants more amenable to working together around a common payments network?
BM: Good question. I can’t comment on what Plenti has run into or what their interactions were, but what I can say is, since I’ve been here that merchants do work together, obviously do compete, but they are interested in creating a solution that can work across the variety of merchants and serve each individual merchant’s needs.
We are individualizing our product to each merchant. Each merchant typically has its own desires and needs as to how they want their products to work. Some of them want to emphasize loyalty programs, or they want to emphasize private label cards, and I think we’re able to do that. So that’s different for us.
We’ve found the merchants to be open and transparent with us about their needs and wants, and we’re open and transparent with them about what we see and what we can deliver.
KW: One very sensitive area which underpins MCX is data, and availability of data, access to data, who gets the data, how it’s used. Obviously very, very sensitive to all merchants. You just referenced that you’re tailoring MCX to enable very specific individualized instances of CurrentC for their environment. But if you’re not leveraging the heft of the network to power loyalty or power things that would make the network enable a better experience for merchants and consumers, I’m struggling to understand the value of being part of the network. Can you explain that?
BM: From our standpoint, the value is that CurrentC will work across a variety of merchants in many retail sectors. And merchants do not share the data on the consumers, but we can at least provide a consistent experience in terms of the basic product and how it works.
Now, within each individual merchant, some merchants may choose to integrate their loyalty program, some other merchant may choose to integrate some sort of rewards program, some merchants might choose to integrate coupons and offers. And we’re allowing each merchant to dictate how that works for them. Mobile gives the merchants better data on the consumers, so we’re certainly working with them on that, for their individual spaces today.
But how we think the network gets leveraged is that consumers know that they can use CurrentC at retailer A in vertical A, and they can also use it at retailer B in vertical B, and know that when they go to retailer A they’re going to get their normal loyalty program and at retailer B, they’re going to be able to use private label card. We think that’s a real benefit to the way consumers want to shop. We’re not asking them to change the way they do business today, we’re saying we’re going to make the product work for them.
KW: But you are asking them to change because in order for them to take advantage of the CurrentC product they have to establish a new method of interacting with you. Isn’t that right?
BM: That is correct.
KW: OK, but what is going to get the consumer to actually open a CurrentC account when they have a consistent experience today — across Apple Pay and presumably soon Android Pay, Samsung Pay, PayPal, etc.? What are you going to do to make your product more attractive to them?
BM: I would say that what we have heard in our feedback so far and what we are working towards and working with our merchant owners on, is the value proposition that consumers can get from using the product other than just replacing the swipe.
For us, bringing in offers and coupons and a loyalty or reward with a single QR code and integrating all of that into one product so the consumer doesn’t have to enter in a phone number or swipe a separate card, etc. We’ve been able to do that with our merchants, and to really integrate directly into their merchant point of sale and I think that gives us an advantage.
Consumers are not going to want to just replace the swipe, but they’re looking for how to replace the swipe and get something else on top of it. And several of our use cases that we’ve had in private beta and several of the use cases that we’re going to Columbus with actually integrate payments with something else — like payment with loyalty and coupons, payment with offers, etc. And, in those tests, we’re going to get additional feedback from those use cases that to say which ones resonate with consumers.
KW: In your private betas, have there been any concerns on the part of consumers in attaching their checking account to a merchant-owned payment system, given the concerns over security and hacking and breaches?
BM: No, it has not.
KW: Let’s talk about the cost of operating your own payments network. That was obviously one of the pillars for why MCX was formed in the first place. Is it really cheaper to operate your own network, given that the cost of payments, especially the cost of debit, is already so cheap?. What’s the business case now for MCX?
BM: The business case for MCX now, and it always has been about how do our merchants engage with consumers in a positive way, how do we do so in a way that enhances both the experience of the consumer, but at the same time meets the needs of the merchants in lane — in terms of a quick payment form, to protect the data for the merchants, so the merchants can utilize the data of their own consumers, and ultimately, we’re always looking for cost efficiencies within the system where we can find them.
But I can tell you, having served merchants for a long time in my career, that [the] No. 1 priority for merchants in lane is always how does the service impact their customers. So if we impact the customer positively, if we get them value-added service as we collect their data, then ultimately we think we’ll get economic efficiencies out of one and two, and we think it all works together.
KW: Paydiant is the engine that underpins what CurrentC is today. I wrote something about a month or so ago and suggested that now that Paydiant is part of PayPal that it would make much more sense to just leverage and negotiate with PayPal, all the things that you just described that your owners need and expect out of a payments method with mobile that comes with a lot of other things. Doesn’t that seem like a better starting point for you given where you are now?
BM: Certainly we will continue to look at additional forms of payment, and additional partnerships where it makes sense for us. We won’t rule anything out, and we continue to be open to others as we talk to others, as it’s just part of the ecosystem.
I will say that Paydiant and PayPal have been strong partners of ours. We continue to interact with them, literally on a daily basis as we bring this product to our public beta. We’re leveraging their technology to help us come to market. I’m not going to speculate on any future business relationships, but all of our relationships today we value, with all our partners, no matter who they are. But certainly we have a strong one today with PayPal and Paydiant.
KW: Who do you regard as your biggest threat?
BM: I guess what I would say is that if I look across the mobile payments space I think there are obviously many players entering the space. Some of those players have different needs or different wants of what they’re trying to do in the space. To me, this is really about consumer adoption to some degree. As mobile payments become more mainstream, that helps all of us. Certainly we think, as I said before, there’s only two or three major players, maybe four major players in the mobile payments space at the end of the day. We fully anticipate, given our distribution network and who we are, that we’ll be one of those. I think it’s incumbent on all of us to do the best we can for the consumers, do the best we can for our merchants and our owners, and just go from there.
KW: You’ve been at the helm since May, and as the new guy, it’s always easy to have 20/20 hindsight. So with 20/20 hindsight and the position that you occupy now, what would you have done differently to establish and launch CurrentC?
BM: Well I can’t comment on anything that happened before the 100 days since I’ve been here. But what I can say is that from Day 1, what I’ve found is an incredible group of people who are rallied around doing the right thing and are rallied around how we service our customers.
I found an incredibly transparent and supportive ownership group who have been amazing with me. Obviously, I knew a lot of them before I ever got into this role, I serviced them for a long time before this, but they’ve been just who said they were going to be and who I thought they were. They’ve been incredibly supportive.
So what I’ve found in the first 100 days is a small band of “work warriors” that are working hard trying to improve the process and improve the product. I can’t look backward. We’re looking forward, we’re looking forward to getting more feedback, looking forward to making our product better as we learn new things, and looking forward to working with our owners to say how we can better serve them and how we can better serve their customers.
KW: Your predecessor used those very same words – an incredibly supportive, incredibly engaged group of merchant owners. But it’s taken so long to get anything done. Why?
BM: You know, I think what we’ve been accomplishing and been building takes time. I think we’re slightly different than some of the other players in the marketplace in that we’re not trying to jump on the existing highway and payment rails that exist today. As you know, one of our advantages is our ability to integrate more directly into the point of sale in a more customized way. And I think some of that creates time frames that may be a little more elongated than just trying to jump on a highway that exists today.
Everybody would like to go faster, there’s no shame in saying everybody who ever introduces a product into the marketplace would like to go as fast as they can. But we’re interested in doing it right, getting feedback, and making the product better and better as we go forward, and that’s what we’re focused on.
KW: How will you characterize success? If reducing the cost of payment is your litmus test, isn’t CurrentC going to be more expensive for a very long time? And even schemes like Starbucks’ — the most successful in-store mobile payments scheme out there — has taken 5 years to get to 20 percent of volume, Target REDCard has taken a lot longer to get to less volume. Your thoughts on that?
BM: I don’t think that reducing the cost of payments is our litmus test. I just want to reiterate that and be clear. We think that consumer engagement and adding value to consumers is probably the No. 1 litmus test for us: Do we bring something that helps our merchants and helps our consumers?
I certainly understand your question. I think that at the end of the day we’re going to have to find success by determining whether we meet the needs of our owners and meet the needs of their customers, and bring them something that is valuable to the point of sale.
We don’t have a specific target number to get to; what we’re looking to do is to make the experience better, to provide something that people will want to use and people will get benefit and value to. We think this is a long game. We think that mobile payment adoption has been relatively slow up to now. We’re probably on a first inning of a nine-inning game, declaring winners or losers is probably too early. But getting feedback, iterating and then getting more feedback, we think, is the path to adoption. Dunkin’ Brands (one of our owners) is incredibly successful with their mobile strategy, Target is incredibly successful with the REDCard. We have merchants who have had tremendous success in rolling out new programs and getting uptake. I’m proud to have them as our owners and have them support us, too.
KW: What do the next 100 days look like?
BM: Well, what the next 100 days look like for us I think are a lot of things we’ve talked about. We’re looking to expand our beta in a public forum in Columbus, looking to get feedback around the product itself and what consumers like and don’t like. We’ll then iterate and continue to build, to make the product better and continue trying to meet the needs of our merchant owners.