Payments Innovation

Hard Knocks Edition: MCX, EMV And Square

While most Americans were probably ready to focus on a news event other than the presidential election, the tragic events of the EgyptAir crash were certainly not the way anyone wanted to get there.

And it is with sadness that PYMNTS notes the international aviation tragedy, and our thoughts go out to the victims and their families.

Back stateside, it was another blockbuster week and just in time for the summer blockbuster season. MCX stopped circling the drain and went right down it, Square got a new rival in WePay and Sen. Dick Durbin (D-IL) decided to take on EMV.

Need to know more?

 

MCX Rides Into The Sunset

After a long failure to launch, MCX officially said goodbye last week, folded up its tent and took a bow.

No encore was demanded.

A statement released by MCX CEO Brian Mooney on May 16, via a PR rep, said that MCX is delaying a nationwide rollout of its CurrentC mobile payments product.

“Utilizing unique feedback from the marketplace and our Columbus pilot, MCX has made a decision to concentrate more heavily in the immediate term on other aspects of our business, including working with financial institutions, like our partnership with Chase, to enable and scale mobile payment solutions. As part of this transition, MCX will postpone a nationwide rollout of its CurrentC application. As MCX has said many times, the mobile payments space is just beginning to take shape; it is early in a long game. MCX’s owner-members remain committed to our future.”

Mooney said that MCX plans to lay off about 30 people.

MCX was formed as a merchant consortium in Aug. 2012 with the intention of creating a mobile-only, merchant-owned payments scheme that ran over ACH rails. The primary reason that MCX was formed wasn’t to introduce mobile payments to consumers as much as it was to introduce MCX members to a cheaper cost of payment acceptance. MCX coalition members hoped that the scheme would be attractive enough to consumers that many of them would shift away from what they were using in the store — branded plastic cards — to its mobile payments scheme.

When it was launched, MCX claimed that its merchant membership collectively drove $1 trillion in sales annually. Walmart’s Mike Cook was perceived to be the guiding force behind the initiative — long a vocal critic of card networks and interchange.

And while the merchants in on the deal all agreed that they didn’t like interchange, it wasn’t a case where every one was necessarily ready to join hands and work together to fight the card brands as a common enemy.

Karen Webster wrote in her noteworthy MCX Fairy Tale piece in Sept. 2013 that MCX was doomed from the start and would ultimately be more expensive to support than the members originally anticipated. Coalitions are tricky to begin with, she said, but ones that consist of competing merchants take tricky to a whole new parallel universe. Gaining consensus across merchants with competing businesses and interests also proved difficult, she later pointed out, as evidenced by the fact that it took MCX three years to get a product to market and launch a small pilot.

When Apple Pay came to market, the wheels started falling off the cart. MCX suffered the dual headline hit of forcing some of its merchants to essentially unplug their Apple (and Android) Pay-compliant NFC terminals, while, at the same time, suffering a minor data breach.

That, in many ways, was the quiet beginning of what is now the obvious end of the MCX mobile payments scheme. Apple Pay and NFC found its way into more MCX merchants, who began to explore other mobile payments alternatives. Rumored calls for capital were rebuffed. Last fall’s announcement of Chase Pay and its “partnership” with MCX, more or less, suggested that MCX’s CurrentC mobile payments app was dead as a doornail, despite denials by Mooney.

Then, in perhaps the most overt sign of its finishing blow, in late Dec. 2015, MCX’s “anchor member,” Walmart, launched Walmart Pay, a QR code-based mobile payments app that leverages Walmart.com credentials, which include network branded credit and debit cards.

Therein tolled the funeral bells for MCX, which learned the hard way that operating a mobile payments platform as a collaboration among competitors with no consumer value proposition looked much better in the (probably pretty expensive) consultant-prepared PowerPoint deck than it did in the field, especially since it has also turned out that consumers aren’t actually just standing around waiting for mobile solutions to a physical checkout problem they don’t presently have. Apple got its payment platform out the door after all, as did Google, mostly to be greeted by a collective consumer shrug.

But at least they got out the door and into the hands of the consumer. CurrentC will go down in mobile payments history as the five-year experiment with three CEOs that failed to produce much of anything.

 

Square’s New Competition

After a rough run following Square’s latest earnings report, probably the last thing the executive team was hoping for was some well-positioned new competition for the hearts and minds of America’s SMBs.

And yet, competition is what it’s got in the form of WePay. WePay, which offers Payments-as-a-Service for online platforms, including FreshBooks, GoFundMe and Constant Contact, announced last week that it will offer a white-label, point-of-sale solution that can enable in-person transactions for SMBs who wish to accept payments anywhere they encounter a customer.

By offering the white-label option to its software providers (who, in turn, can offer it directly to their business customers), WePay enables payments acceptance to any online and physical channel that a software platform’s end customer does business. Now, any of WePay’s platform customers can provide branded card readers to their customers without taking on any of the attendant costs of building or maintaining such hardware or software.

WePay CEO Bill Clerico said that the debut of the new reader “allows anyone to compete with Square.”

Clerico told Karen Webster before the announcement that software companies that serve small businesses will no longer have to refer those companies to a third party to accept in-person payments but rather offer that service under their own brand.

“Obviously, the movement that is called integrated payments has been happening for a while,” Clerico noted, “but 90 percent of commerce happens in-person.” The push to offer a white-label reader, he continued, “is really a switch from online integrated payments to omnichannel integrated payments.”

The technology, itself through the reader, plugs directly into iOS and Android devices, which, in turn, allows the merchants to accept payments across both EMV chip cards and magnetic stripe cards. The only element firms need to add themselves is some code to their software and also their mobile applications in order to integrate the reader.

“The main value proposition,” said Clerico, “is that [merchants] can send invoices out using the software and can get paid online or get paid using mPOS and get all the reporting in one place that is tightly integrated within the software. Before these businesses had separate accounts to do invoicing and reporting. SMBs would have their Square account, their PayPal account and they had to keep track of all of it. We think it’s much better to have all the data in one place so that the business can focus on sales and growth and not administrative details and manual account reconciliation.”

Integrating payments into software is easier than integrating software into payments.

 

Durbin Vs. EMVCo

Sen. Dick Durbin is less than impressed with EMV’s progress in the U.S. And he seems to be mad as &*$% and wants to do something about it.

That was the gist of a letter Sen. Durbin sent to the the chip card consortium EMVCo, whose member companies are American Express, Discover, JCB, MasterCard, UnionPay and Visa.

Sen. Durbin accused the organization of impeding retailers’ efforts to gain EMV certification and delaying the requirement of PIN authorization in order to financially benefit the card networks.

And that was just one of a few letters Sen. Durbin was writing last week. The senator was clearly in an epistolary state of mind.

He also wrote the Federal Trade Commission (FTC), requesting that the agency “examine how flaws and delays in the [EMV] certification process can be addressed.”

According to The Strawhecker Group, only 37 percent of U.S. merchants were able to process EMV transactions as of the date of the liability shift — Oct. 1, 2016.

And Durbin does not seem to think the responsibility for the delay can be split between merchants and cards networks. He pretty much just blames the card networks.

“The process of establishing EMV specifications is opaque, stakeholder participation is limited, decision-making is dominated and exclusively controlled by only six companies, EMVCo standards have been technologically inadequate, and their implementation has caused chaos in the U.S. market and consensus has been lacking.”

In his letter, Durbin also addressed the lawsuits that retailers have filed over the issues with the EMV card rollout, such as what B&R Supermarkets did against all the card networks in March and Walmart did against Visa just last week.

“I am concerned that EMVCo’s controlling networks, most of whom have fiercely advocated against PINs because of their financial stake in signature transactions, may be preventing EMVCo from stating a clear position on the benefits of PIN.”

That sounds good, as all well-pitched political battles do these days.

 

So, what did we learn this week?

Well, we could say we learned that MCX was going bye-bye, but if you read PYMNTS, you already probably knew that this ending was inevitable. What we really learned is that mobile payments without a consumer value proposition are DOA, even if you’ve already de facto onboarded many of the nation’s largest merchants.

We learned that embedding payments into software is more advantageous to the SMB than the other way around. And we learned that Sen. Dick Durbin is very unhappy with EMV and wants everyone to know it.

Tune in next week.

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