MCX and CurrentC: How to Become the Laughingstock of the Mobile Payments Industry

Conceived in 2012 to save retailers $15 billion in annual payment card processing fees, CurrentC is still not widely available, largely due to a disconnect between MCX’s business and operating models.

MCX Merchant Consortium
MCX Merchant Consortium [2]
Business Model

MCX (Merchant Customer Exchange) is a mobile payments company founded and funded by a consortium of major US merchants, including Walmart, Target, Best Buy, 7-Eleven, CVS, and Shell [1]. The unique roots of the company give rise to an unusual business model: MCX is not meant to generate any meaningful revenue, but rather, its goal is to save money for participating merchants.

MCX merchants process over $1 trillion in annual card-based payment volume [2]. Assuming an effective “swipe fee” of 1.5% for card payments, MCX merchants spend over $15 billion annually on payment processing. If MCX is able to transition consumers away from using cards and towards CurrentC (its low-cost payments application), significant cost savings could be realized.

Operating Model

To be aligned with a business model of reducing merchant swipe fees, MCX’s operating model must emphasize rapid consumer adoption of CurrentC above all else. Unfortunately, this is not the case. Several major misalignments are visible:

Corporate Decision-Making

In the rapidly evolving mobile payments space, a slow corporate decision-making process can kill a product before it has even launched. MCX has made it abundantly clear that, as a company, they are unable to make quick decisions. MCX was founded in 2011 [2], and, as of the end of 2015, CurrentC is still only live as a pilot in Columbus, Ohio [3] – not exactly a hub of fintech early adopters. When trying to cater to a large number of merchant stakeholders, some of whom viciously compete with each other, disagreements are to be expected. However, it seems that a more effective governance framework should have been established to prioritize an expeditious product launch.

Go-To-Market Preparation

To prevent competing mobile payments solutions such as Apple Pay and Android Pay from gaining traction while CurrentC was still being developed, MCX contractually obligated its member merchants to disable their contactless (tap-to-pay) point-of-sale systems [2]. This garnered a considerable amount of negative publicity for MCX and confused shoppers as they attempted to check out using mobile payment solutions at MCX merchants. In the future, shoppers will likely be less willing to try mobile payments at MCX merchants again, which does not bode well for CurrentC’s eventual launch.

CurrentC Payment Initiation [2]
CurrentC Payment Initiation [2]
Payment Initiation Mechanism

CurrentC is based on QR (quick response) codes [3]. In order to accept CurrentC payments, merchants have to invest in hardware and software that enables QR code scanning, which likely contributed to launch delays. Additionally, consumers are already familiar with standardized mobile contactless payments (like Apple Pay and Android Pay), which makes the unpopular QR code a puzzling choice for demonstrating the value of the CurrentC asset to consumers.

Payment Funding Mechanism

CurrentC eschews card payment networks such as Visa and MasterCard in favor of ACH (Automated Clearing House – an electronic fund transfer system that moves money between bank accounts) [2]. Although ACH is extremely inexpensive for merchants, it does not have the same level of consumer protection in case of fraud. To use ACH, consumers must input their bank account and driver’s license details into the CurrentC application [3] – something that most people would be very reluctant to do. Consumers likely became even more hesitant to share their sensitive information with CurrentC when MCX experienced a customer data security breach in late 2014 [4]. Instead of attempting an extremely aggressive all-ACH-or-nothing operations strategy for transaction funding, MCX should have considered working with tried-and-trusted credit and debit cards initially, then steering consumers towards ACH once trust in the CurrentC product had been established.

QR Code Popularity [5]
QR Code Popularity [5]

MCX and CurrentC are destined to fail. The MCX business model focuses on disintermediating traditional payment networks – in order for it to succeed, an operating model that emphasizes fast consumer adoption of CurrentC must be implemented. However, MCX’s operating model is anything but this. From a slow decision-making process that has prevented a true product launch, to odd go-to-market preparation that has resulted in bad press and consumer confusion, to payment funding and initiation mechanisms that pose high barriers to consumer trialability and usage, MCX has become the laughingstock of the mobile payments industry.

In fact, CurrentC is seen as such a joke that an interesting hypothesis has been suggested by payment industry experts: CurrentC may not actually need to launch, but rather, the threat of CurrentC potentially becoming viable may be enough to allow merchants to collectively negotiate lower swipe fees with traditional card-based payment networks [2]. In the words of former Walmart CEO Lee Scott, “I don’t know that MCX will succeed, and I don’t care. As long as Visa suffers.”




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Student comments on MCX and CurrentC: How to Become the Laughingstock of the Mobile Payments Industry

  1. Interesting post, Mark!

    I like your idea that the threat of MCX could lower credit card fees. I wonder, similarly, if there have been talks about a price at which other mobile payment solutions like ApplePay would be willing to compensate MCX network companies to introduce their technology. For now it seems that ApplePay doesn’t have the traction to be able to work with them, but it would be interesting to think through other ways they could monetize this alliance. Though it hasn’t been particularly effective for many of the reasons you described, bringing that many powerful retailers together is an accomplishment in and of itself that I’d like for them to be able to capitalize on in some way.

    1. Great comment Megan – it really all does come down to price. If AAPL is willing to take less of a cut on Apple Pay, or if V/MA/AXP are willing to charge lower processing/brand fees, or if card-issuing banks are willing to take less interchange revenue, then there is no conflict and Apple Pay would likely be rolled out at MCX/CurrentC merchants without resistance.

      Bringing so many powerful retailers together is an enormous accomplishment, and one that, behind closed doors, has likely not truly been acheived. Funnily and ironically, the day after I submitted this post, Walmart decided to break away from the rest of the MCX/CurrentC merchants and announce Walmart Pay (yes, seriously: Just shows us that herding cats (especially when the cats are named Walmart, Target, CVS, and Lowe’s) is almost impossible.

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