Walmart-Backed MCX Aims to Dominate Mobile Payments

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Will a new mobile payment system backed by the nation's biggest stores render Google Wallet obsolete? The newly formed Merchant Customer Exchange (MCX) network hopes so.

Retail heavyweights such as Wal-Mart (WMT), Target (TGT), Best Buy (BBY) and CVS (CVS) have banded behind MCX, a new mobile payment network that's angling to become the universal way shoppers pay for purchases with their smartphones.

Although development of the mobile application is still under way, MCX would compete with existing services such as Google (GOOG) Wallet, PayPal and technology from Square Inc., which is being adopted by Starbucks (SBUX).

The Rise of the Digital Wallet

"Digital wallets" enable shoppers to leave their deck of credit cards at home and instead simply use their smartphones to pay for purchases. And while new mobile payment options keep on popping up, retailers have yet to adopt a universal platform.

MCX could be that game changer, experts say -- not just because it has been designed for retailers by retailers, but because it will be adopted by the nation's biggest chains.

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Walmart-Backed MCX Aims to Dominate Mobile Payments

Expect to see these gain popularity over the next 12 to 18 months. Augmented-reality apps offer consumers rich content -- be it on an item's features and benefits, or information that compares and contrasts various products to help shoppers make better on-the-spot, informed shopping decisions.

So in theory, a supermarket shopper with health issues debating between several cereal brands could tap an augmented-reality app to pull up product information and "compare this product versus three others," Fry says.

And AR apps will likely move beyond the supermarket aisle: There are whispers that Walmart (WMT) and Best Buy (BBY) will soon be launching augmented-reality apps.

These apps are one way retailers are fighting showrooming, when shoppers use brick-and-mortar stores as showrooms to check out potential purchases, only to buy later from online merchants at a lower price, Fry says.

"Information is value. Consumers aren't just buying on the basis of the lowest-possible price, he says. "Augmented reality apps will allow [retailers] to make a showroom that Amazon [for example,] will have difficulty duplicating."

Fry says augmented reality-apps offer a more sophisticated evolution what retailers have been attempting with QR codes, the black-and-white matrix bar codes that have been popping up on everything from product displays to store windows.

Lusting after a cool blouse or a sleek flatscreen TV but can't justify paying the steep price? Well, just as sites like FareCompare.com alert travelers when airfares drop, clothing store Bebe (BEBE) and Best Buy now offer apps that will alert shoppers when an item goes on sale.

"Essentially, by using the retailer's app, a user can mark an item as a favorite and choose to be alerted when the product goes on sale, or reaches a price point specified by the user," Scott Gamble, vice president of digital solutions for AllianceData, which issues retail credit cards for stores like J. Crew and Pottery Barn, tells DailyFinance. "Specialty, electronic, and hard goods retailers would be most likely to implement this type of tool moving forward."

Alliance Data is now developing a "virtual gifting" mobile tool that it plans to launch as a pilot program later this year.

"The general idea behind this capability is that it would allow a cardholder of one [retail store] brand to send a virtual 'gift card' via a mobile device to another cardholder of the same brand," Gamble says. "The gift could be redeemed in-store via the recipient cardholder's mobile device. Women's specialty retailers will likely be among the first to launch this sort of tool."

While the jury is still out on how tablet computers will ultimately figure into the shopping experience, retailers are already starting to capitalize on tablets' advantage over smartphones, most notably, their larger screen size.

Retailers are now leveraging tablets to help consumers do more than simply make purchases; the goal now is to help people solve more complex shopping problems like how to redecorate a room or piece together a wardrobe. The right tool for those project-sized tasks: Magalogs, hybrid magazine/catalog mobile sites that offer how-to advice and rich content, Fry says. "It's about providing better context to make it easier for shoppers to purchase from these retailers," he says. The consumers can conceivably use retailers' mobile magalogs to walk them through a project in a store. They'll use their tablets to "give me ideas and tell me how to execute a project," Fry says.

Cosmetics chain Sephora, for one, announced this week the test roll out of iPads to 20 stores, where they will give shoppers another way to navigate the retailer's thousands of products and interact with the menu of services offered by its Beauty Studio.

Sephora just updated its online and mobile sites. Now, each product on Sephora.com is tagged and indexed with 25 different characteristics, from data like target age group, to specific ingredients, formulations, fragrance, price and more, in a bid to offer shoppers a targeted, personalized shopping experience.

Some women's apparel chains are strategically placing QR codes in their stores -- in fitting rooms, for example -- so that shoppers can sign up for store credit cards on the spot, assuming that the shopper has both a camera and a QR-code reader on their smartphone.

A shopper can scan the QR code, which connects them to the retailer's mobile-optimized website, where they're asked a few questions to apply for the store card, Gamble says. If qualified, "they would receive approval within a minute or less."

"The QR code makes the application process very quick and convenient for the customer and, upon approval, almost immediately specifies their buying power -- their credit limit -- so they can immediately take advantage of the benefits of instant discounts and rewards that typically come with the initial card purchase," he says.

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The 15 public retailers that have invested in MCX so far have a trillion in annual sales among them, notes Jeremy Mullman, a spokesman for MCX.

Because these are the chains that most people frequent, "they can create a [mobile payment] standard that's accepted everywhere," Mullman says. "That's a major point of differentiation from anything else."

For example, "you can start your day pumping gas at 7-Eleven, getting your groceries at Target and going to Lowe's and Best Buy to run your errands -- and you can do all those things paying the exact same way on your smartphone," Mullman says. As a result, MCX will create a "ubiquity" that will drive its mainstream usage.

Setting a Standard for Mobile Payments

There was plenty of support for that view in RetailWire's recent online forum covering the topic.
"It was always my position that retailers are holding the trump card in the mobile payment landscape," said Ed Dunn, founder of Stealth Operation.

But not everyone agrees.

While MCX "will give a boost to mobile payment systems ... it could also serve to confuse consumers," said Max Goldberg, founding partner for the Radical Clarity Group, on the RetailWire forum.

"There needs to be consolidation within mobile payment options. Consumers do not want to walk into a store and have to figure out which mobile payment application(s) are accepted. That would be a nonstarter. Until there is uniformity, mobile payments will not become widely used," he said.

And although MCX has the edge over other mobile payment platforms to drive adoption and usage among the nation's largest retailers, "it doesn't necessarily render the other mobile wallets and payment platforms obsolete," Jason Buechel, a senior executive in Accenture's Retail Practice, told DailyFinance.

"Many of the other wallets and payment platforms have already developed relationships with smaller businesses and online merchants which will continue to make up a significant portion of transactions," he said.

Time will tell.

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