Retailers Want to Write the e-Payment Rules

Scarcely a week goes by lately without news regarding virtual payments. This summer has been particularly busy, as Google rolls out its new, improved digital wallet, and Isis, backed by telecommunications giants AT&T, T-Mobile, and Verizon Wireless, started testing its e-wallet in a handful of markets this month. Then, of course, there's the big Starbucks-Square payments pact.

More recently, two big announcements hit the media, seemingly within hours of each other: The Electronic Transactions Association formed a Mobile Payments Committee to propel e-payments into the mainstream. Not to be outdone, a group of retailers reported that they're banding together to lasso their part of the digital-payments market, too. Led by big boxes Target (NYS: TGT) and Wal-Mart (NYS: WMT) , the coalition is called the Merchant Customer Exchange, and its mission is to bring customers "the convenience of paying at the register with customizable offers."

This concept is not new; the only news is that the group now has more members, and the company now has a name. Target and Wal-Mart first announced that this project was in the works earlier this year but offered no details. Since then, companies such as Best Buy (NYS: BBY) , Sears Holdings (NAS: SHLD) , Darden Restaurants, and Sunoco (NYS: SUN) have come on board, and the group announced that it is currently developing a mobile app that will be available on "virtually" all smartphones -- no pun intended, I'm sure.

And keep in mind that under the terms of a massive proposed settlement with credit card companies, retailers would be allowed to cooperatively negotiate over the swipe fees card companies charge them.

With all this elbowing for prime space in the e-payments realm, you'd think this sector must be booming, fairly bursting at the seams with profits for those who can jump in with a credible payment system. In actuality, it's a lightly used technology, though it's predicted to grow to into a $600 billion behemoth within the next four years.

Fool's take
It's obvious why the retailers want in, but what do they have to offer that's different from all the other players? In a word: control. Stores want to be able to format personalized offers and coupons to their customers, something that's considered too restrictive with the systems currently available. Merchants want a platform to create a gaggle of retail programs, promotions, and offers aimed at consumers. First and foremost, then, it appears to be merchant tool, rather than a consumer convenience.

That doesn't mean it can't be advantageous to customers, of course. The group does pledge to offer a secure platform, something that should help allay consumer fears about privacy during transactions. And, in this climate of daily deals, customized offers from merchants might be a big hit with customers. The big unknown is whether this factor will be enough to make their offering more attractive to consumers than their competitors'.

The coalition doesn't say when its product will be available, so it will be some time before the Merchant Customer Exchange gets a test run. Others are ahead of the group, and it seems as if it took nearly six months just to market the idea to a handful of prospects and pick a name. So far, its commitment to "efficiency" is looking doubtful.

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Fool contributorAmanda Alixowns no shares in the companies mentioned above. The Motley Fool owns shares of Google, Best Buy, Darden Restaurants, and Starbucks.Motley Fool newsletter serviceshave recommended buying shares of Google and Starbucks and writing covered calls on Starbucks. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.

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