Mobile payments battle starts to heat up

16 August 2012

NEW YORK: Leading retailers including Best Buy, Target and Walmart are joining forces to create a new mobile payments platform, placing them in opposition to firms like Google and Verizon.

In all, 14 chains have joined the Merchant Customer Exchange (MCX), a group also featuring 7-Eleven, CVS, Lowe's and Sears. The participants boast combined annual sales of some $1tr, and reportedly "serve nearly every smartphone-enabled American".

"MCX will leverage mobile technology to give consumers a faster and more convenient shopping experience while eliminating unnecessary costs for all stakeholders," said Mike Cook, corporate vice president and assistant treasurer at Walmart.

The immediate goal of the Exchange will be to deliver an app which facilitates mcommerce payments in bricks and mortar stores, alongside the capability to distribute "customisable offers".

"We're confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient," said Mark Williams, president of financial services at Best Buy.

Google, the online giant, first entered this space last year. It launched Google Wallet via a tie-up with initial partners Citigroup and MasterCard, the financial brands, and Sprint, the telecoms company.

Elsewhere, Verizon, AT&T and T-Mobile, the mobile specialists, have allied with JPMorgan Chase, Capital One and Barclays, the financial services providers, to form Isis, and develop a competing product.

However, the Merchant Customer Exchange may possess a unique advantage compared with its rivals, Terry Scully, president of Target's financial and retail services, suggested.

"I do believe that retailers are uniquely qualified to address what we believe are consumer desires in this space," he argued.

According to estimates from Forrester, the research firm, US mobile commerce should register a compound annual growth rate of 39% from 2011 to 2016, hitting $31bn, or 7% of online retail sales.

Starbucks, the coffee house chain, unveiled a mobile payments app in 2011, which now yields 1m transactions a week. "I can't think of anything we've introduced in the last 40 years that had this kind of adoption," Howard Schultz, Starbucks' CEO said.

To build on this momentum, the company recently announced it would adopt the mcommerce tools provided by Square, a start-up run by Jack Dorsey, the co-founder of Twitter. Starbucks will also invest $25m in its new partner.

Data sourced from Bloomberg; additional content by Warc staff