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 . 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 . 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.
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:
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 , and, as of the end of 2015, CurrentC is still only live as a pilot in Columbus, Ohio  – 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.
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 . 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.
Payment Initiation Mechanism
CurrentC is based on QR (quick response) codes . 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) . 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  – 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 . 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.
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 . 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.”