Bloomberg broke a story on Friday afternoon that CurrentC, the merchant-owned mobile payments scheme, is a couple of weeks away from launching. Generally, news that breaks on a Friday afternoon, and especially on a Friday afternoon in the summer, falls into the category of news that the newsmaker isn’t all that keen about getting lots of attention.
So much for that.
I was looking for something to write about for Monday so thanks, Bloomberg and CurrentC, for the inspiration.
Of course, in some ways, this non-announcement-announcement is a bit of déjà vu all over again. It was three years ago that news broke that MCX was launching a mobile payments scheme owned and operated by a group of merchants that collectively drove $1 trillion of consumer spend in the U.S. – about a third.
It’s been three years and crickets.
Some are inclined to give CurrentC the benefit of the doubt for taking so long to launch. Maybe, they say, three years has given CurrentC time to perfect their offer, see what others are doing, and adapt and pivot.
I doubt it.
I think that the launch is three years in the making for one and only one reason: It was impossible to get the warring factions of the marketing guys – who just want to enable any form of payment consumers want to use to pay for things in the stores that consumers don’t seem to want to walk into anymore – and the finance guys — who think payments should be free — to agree on what “it” is and why anyone but them should care.
These groups probably really went war last fall when Apple Pay launched and MCX merchants with NFC-enabled terminals all of a sudden found themselves in violation of MCX T&Cs which did not enable them to accept any other mobile payments scheme in their stores. Interesting, don’t you think, that the launch now is right around the time that contracts that have held founding CurrentC merchants hostage to their exclusive and as yet elusive mobile payments scheme are expiring?
But three years into a mobile payments environment with competitors the likes of Apple Pay, Android Pay, Samsung Pay, a newly independent PayPal (that earlier this year acquired the technology provider that is powering CurrentC – Paydiant), and others waiting in the wings, just makes their launch and path to ignition that much more difficult. Not to mention a scheme that at least three years ago, was only about enabling payment in one shopping channel – offline – where there is the least amount of friction for the consumer. Any offline mobile wallet solution has to be better than the plastic card that works just fine today and works everywhere.
Those of you who follow my analyses on PYMNTS know that I’ve not been CurrentC’s biggest fan from the get-go. I never thought that merchants needed to go to the time, trouble and expense of building and operating a payments network to enable a “merchant-friendly” payments scheme. And let’s face it, CurrentC may be a consortia of merchants, but it is disproportionally powered by the (now) second largest retailer (by market cap) in the world – Walmart — with a very unique customer base. Walmart’s concern over interchange is driven by the fact that any mobile payments scheme that a Walmart customer wants to use will drive up their cost of acceptance. Today, Walmart has a very predominant cash-paying consumer. Walmart’s interest in controlling mobile payments to MCX and only MCX was to keep the delta from cash to anything else as low as possible.
But rather than continue my CurrentC rant here (you can read those here), I thought I’d take a different and more constructive tact.
I have no idea what the new (and hopefully improved!) CurrentC will look like, but here’s what a promising CurrentC would be when it finally does take the lid off of it in a few weeks. You can measure how successful they are likely to be based on how they measure up to this.
In a Perfect CurrentC World …..
Getting consumers on board is job one for CurrentC — and any mobile wallet player for that matter. And, CurrentC is starting with Z.E.R.O. consumers. Sure, participating merchants all have customers as prospects, but they need those customers to create a CurrentC mobile payments account and then use it! That will require the network called CurrentC to give consumers an incentive to do that – and a pretty big one – for a couple of reasons.
Starting with getting those consumers over their security nervousness when they ask them to hand over their checking account information in order to establish a CurrentC account.
Potential CurrentC customers will soon have (if they don’t already) cards with chips in them from their banks. They are being told the reason they need to use them is that they are safer to use when transacting in a store at the point of sale. The banks don’t exactly finish the sentence and say, “and the reason we’re giving you a new card that will totally change your experience at the point of sale to one that you probably won’t like much is because merchant POS systems have been hacked and data has been stolen from them and this is one of the things we feel we need to do to keep us from having our lunch eaten by merchants who can’t keep your data safe.” But they don’t have to. Consumers totally get that the big hacks that have given them the heebie-jeebies about using their cards in stores have been at merchants and via the physical POS.
So, that would suggest that the odds of success of having CurrentC, some unfamiliar and brand new merchant-backed consortia, issue a consumer a mobile payments account that requires that a consumer hand over their checking account number would seem, well, low to very low.
That’s why CurrentC should abandon the idea of operating its own network and instead team up with a partner to “issue” CurrentC accounts – a partner with a brand that has consumers’ trust already, that can also enable payment via a checking account, for starters.
There are a few obvious candidates that pop to the top of that list.
The CurrentC/PayPal Combo
Yes, that would be the same PayPal that recently bought Paydiant, who powers (or did) the technology for MCX/CurrentC. And, who also scores very highly on the consumer online/mobile trust-o-meter. And who can enable payment via checking accounts – and would very much like to do more of that. PayPal has made a big point recently of enabling any method of payment that a consumer wants to use as part of her PayPal account, and even goes so far as to remind consumers that using their credit cards as part of PayPal means they still earn points on those purchases.
But, as Visa CEO Charlie Scharf pointed out last week, PayPal would very much like to create more favorable economics and flip credit card customers to ACH customers. It’s one of the things that’s on his mind, and he says it is “not sustainable,” well, if you are a payments network that likes having payments volume running over it. About half of PayPal’s business is driven by ACH-transactions, so consumers have already made that leap of faith with them. A bit more juicing in the form of incentives, paid for by CurrentC merchants, might help everyone over their respective strategic humps.
And unlike CurrentC, which is just about enabling mobile payments in-store, PayPal can give consumers, utility across all of the channels consumers shop with the same “form factor.” PayPal would certainly be keen to get more consumers using their wallets and a CurrentC/PayPal mashup would enable CurrentC to push the accelerator down on giving its merchants an omnichannel experience in a material way and PayPal a foothold in the offline world.
Chase is a mega issuer with mega payments ambitions and Chase Pay out there just waiting to be ignited. Chase has also invested millions in establishing itself as a consumer friendly brand, one that now has growing mobile use. Chase’s deal last year with Visa has ridiculously reduced the cost of acceptance for its merchants, which ticks a big box for CurrentC and its biggest founding partner, Walmart.
A Chase/CurrentC mashup could approach the market in a couple of ways. Chase could issue CurrentC debit cards enabled via the Chase Pay mobile app and/or even incent existing Chase debit card holders to attach their cards to Chase Pay accounts for use at CurrentC merchants. Either or both could be done in exchange for special offers and promotions to stimulate usage of the Chase Pay wallet while greasing the skids for use at CurrentC merchants. No fuss and no muss, and a stronger chance of getting Chase Pay and CurrentC usage.
Discover-ing A CurrentC Lifeline?
Discover could do for CurrentC what it did for Sears – only in reverse.
Discover could enable all of its existing cash back debit cardholders to now have those cards enabled for use at CurrentC participating merchants with cash back rewards, and other incentives as appropriate. That would also solve the CurrentC starting-with-no-consumers problem, and its how-do-I-get-them-to-care incentive problem – as consumers love cash back, and Discover is the master of enabling those schemes. Discover, as a network (and a network that white labels its services) and issuer also enables acceptance in a single “mobile wallet” of debit products (cheap over Discover’s PIN debit rails) and private label cards – the issuer’s most favorite thing ever. Such a partnership would not check the I-really-need-volume-on-my-network box for Discover but also possibly enable private label card usage for CurrentC merchants that have or want that capability as part of the mobile app. That might also check a big box for Discover after the loss last year of the Walmart deal, which was its largest private label gig.
But The One Thing That Shouldn’t Happen …
Just incase it wasn’t obvious, there is one common thread to each of the mashups described above.
A CurrentC network launched as an independent solo network is DOA. DOA from the consumer’s standpoint and DOA from the merchant’s standpoint. (The same is true if they don’t really have a very committed partner, so also watch for a lame partnership announcement.)
First, it seems nuts for a new merchant-branded network to ask a consumer to establish a form of payment that is brand new, can only be used offline where the cards they have in their wallets work perfectly fine today and only in a few stores. . From a consumer’s standpoint, that’s going backwards. Then, on top of that, asking the consumer to open that account by linking their most sensitive of transacting accounts – their checking account – to it – seems implausible. Even Target’s credit card, the poster child of such accounts – the Target REDCard — has seen the growth of that product slow since the breach. It drove 20.4 percent of volume in Q1 2014, growth that the CFO said on that earnings call was below what they had seen prior to the breach. A year later, the Target REDCard has grown some – it’s now driving 21.5 percent of sales – growing but not nearly at the clip it had seen in the past.
Then there’s the issue of acceptance.
It’s hard to believe that after sitting on the sidelines for three years, CurrentC hasn’t picked up on the fact that if offline is the game you are playing, then acceptance – as in a lot of it – matters a ton. Apple Pay is exhibit A of that point and comes to market as well positioned as anyone could: riding the coattails of the world’s biggest and beloved technology brand and the backing of the payments network and ecosystem that consumers know, trust and have used for decades.
“So Why Are We Doing This Again?” …
From a merchant’s standpoint, it’s also hard to believe that they have to go to the trouble of creating their own payments network to engage consumers via a mobile device so that they don’t compromise their relationship with their customer, their access to customer data and the cost of enabling that payment transaction. Those are all valid merchant concerns, but points of negotiation that can be handled without deciding to cede from the union; operate and scale a brand new payments network.
Perhaps the biggest and most recent proof point that merchants shouldn’t own payments networks is the recent decoupling of PayPal from eBay. PayPal, as an independent entity, will be able to do many more things for merchants as its own network on its own than it ever could when it was owned by one.
Let’s not forget that general purpose payments cards exist because merchants couldn’t manage payments and the risk inherent in the payments business, at any sort of scale — and they didn’t want to. What merchants really want, all together now, is to sell stuff. And if you’re a merchant with a physical presence, your top priority now is getting consumers into your store. Investing in building a mobile payments scheme that is only about enabling payment in those physical stores after year after year of declining foot traffic is a bit like rearranging the deck chairs on the RMS Titanic as it is sinking. The most merchant-friendly solution is the one that consumers want to use to pay for the things they want to buy from those merchants in those stores.
Scott Rankin, CurrentC’s COO, was quoted in the Bloomberg article as saying that there was room in the market for many successful mobile payments schemes. And, he’s absolutely right (so long as you define “many” as more than 1 and less than 5) – there won’t be a winner take all in mobile and digital payments. There aren’t now in the physical card world.
Unfortunately, I don’t think that a new merchant-branded network all on its own, driven solely out of the desire of merchants to save a few bucks on acceptance is one that the market will make room for. But that’s not for me to decide – or Current C, either. Consumers will decide which mobile payments solutions will succeed and which ones won’t. And now, three years after MCX’s idea was hatched, there are now a ton of other options with more momentum and better value for those consumers to consider – in an environment where they are unfortunately reminded of the merchant breaches and POS hacks almost on a weekly basis.
MPD Founder David Evans said it best a couple of years back when MCX first launched: the notion that merchants can be successful operating a payments network is as likely as payments networks being successful selling shirts.
I guess we find out in due time if payments networks should start opening up stores selling shirts on the High Street.