A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors
According to an article in NFC World about MCX’s mobile wallet (to be named CurrentC):
“Consumers will benefit from using CurrentC in four main ways: 1) Save money with valuable coupons and offers; 2) Earn rewards from participating merchant loyalty programs; 3) Pay simply; and 4) A more secure way to pay.”
My take: In September 2013, I predicted that MCX’s plans for a mobile wallet were flawed. Based on my calculations and estimates, the cost of driving adoption of the wallet (through marketing and discounts) would offset any reduction in interchange fees the merchants realized. I’m sticking to my guns:MCX’s mobile wallet is doomed to fail.
Let’s look more closely at some of the supposed consumer benefits.
According to the NFC article, “CurrentC will store and automatically apply offers, coupons and promotions from participating merchants during the payment process.”
No doubt that will be helpful. But how many coupons that a single consumer tracks and manages are from MCX merchants? Don’t you think consumers want an app that helps them manage all their coupons?
And how will MCX determine which (and how many) coupons to offer CurrentC users? Surely, every one of the participating merchants will want to push their coupons out to users. Do you really think consumers want a gazillion more coupons pushed out to them? And if the only way to get a coupon pushed is when a consumer is already in a merchant’s store, that doesn’t really help that merchant with new customer acquisition, now does it?
Furthermore, let’s review again the impetus behind the MCX consortium. If merchants simply needed a place to push out more coupons and drive more business, they could have partnered with Google or Apple. But they didn’t. They set up their own payment processing capabilities, because the real impetus here is avoiding interchange fees.
Interchange fees vary greatly, of course, but it’s fair to estimate that, at a transaction level, the fee ranges from 1% to 5% of the transaction value. Not only will MCX need to offer coupons to drive additional revenue, it will need to offer coupons–above and beyond what’s already available–to drive adoption of the CurrentC mobile wallet.
With a 10% discount on a transaction, MCX will need to drive an additional two to 10 transactions on the mobile wallet in order to recoup the promotional costs. Good luck with that, merchants.
The NFC World article also says that “CurrentC will offer customers the freedom to pay with a variety of financial accounts, including personal checking accounts, merchant gift cards and select merchant-branded credit and debit accounts. Additional payment options are to be made available in the coming months.”
Raise your hand if you want to give up on the rewards you’ve been earning on your Amex, Visa, or MasterCard credit or debit cards. I don’t see any hands in the air.
Consumers are not going to give up their existing cards–on an on-going basis–in order to use this mobile wallet.
I recently purchased an oven/stove at Sears (OK, *I* didn’t buy it, my wife did. But she bought it with my money. OK, it’s not really *my* money). To get a discount on the oven, we opened a Sears credit card. When the bill comes, we’ll pay off the balance, and discontinue the card.
Now, with the introduction of CurrentC, how will this transaction work? I would imagine that the salesperson will tell me I could qualify for a discount if I download the mobile wallet, and use it to make some specified level of future purchases at Sears. Really? I’m not going to agree to that. And neither will anyone else. If I can get the discount for just downloading the app–and not committing to future use–then sign me up, baby!
I shouldn’t be giving MCX any advice here, but if they were smart, they would do this payment thing the other way around: START with Amex/Visa/MC cards and, over time, wean users off those cards onto merchant gift cards and merchant-branded credit and debit cards. But what do I know?
The NFC World article goes on to say “CurrentC will provide a more secure payment experience than traditional methods by storing users’ sensitive financial information in its cloud vault rather than locally on the mobile device. Furthermore, the application uses a token placeholder to facilitate transactions instead of constantly passing the data between the user, merchant and financial institution.”
Translation: Oh, the hell with it…I have no idea what this means. And neither do millions of other consumers out there.
Remember, this was positioned as a benefit to consumers. But few consumers will have any idea what this means, and very likely, will feel less confident about “storing sensitive financial information in the cloud vault” than they do about current methods of storing data.
At last year’s BAI Retail Delivery conference, I hosted a meeting of CMOs from large FIs, which featured Lee Scott, the former CEO of Walmart (who is a member of MCX). I asked Mr. Scott why, in the face of so many failed consortia before it, would MCX succeed?
He said: “I don’t know that it will, and I don’t care. As long as Visa suffers.”
Bottom line: I don’t know if MCX will succeed, either. But I’m betting against it.