August 2012 was a significant month for merchants in the mobile payments space. First, Starbucks and Square announced that they will be entering into a partnership that enables customers to pay for their coffee using their smartphones. Then the establishment of the “Merchant Customer Exchange”(MCX) was announced to effectively kill receipts. This coalition of national retailers will collaborate to create an app that can manage coupons, loyalty programs, gift cards and mobile payments. The list of retailers involved in MCX is impressive and includes Walmart, Target, Sears, CVS, Lowe’s, Darden Restaurants, and Shell just to name a few. The list also illustrates the breadth of categories that MCX will cover.
Generally, with any new payment tool, the greatest barrier to widespread adoption is the classic “chicken or egg” problem.
Consumers won’t sign up for a new payment tool because they are worried that not many merchants will accept it. Conversely, merchants won’t invest or take the risk in accepting something new because not a lot of customers have it yet. With the large broad customer base that Starbucks and MCX merchants have to offer, we expect other merchants will be encouraged to accept Square and MCX at their registers, therefore setting in motion a strong positive feedback loop for these tools. More merchants means more encouragement for more customers to sign up, which in turn encourages even more merchants to sign up.
Big merchants are putting a stake in the ground in the next seismic iteration of the mobile payments space. With debit and credit cards, merchants have traditionally been dissatisfied with the balance of power between them, the banks, and the payment networks.
The move to mobile payments, however, brings wider opportunity. With mobile payments, not only are all these traditional players in the payment space involved, but smart phone brands and mobile data providers are as well, and as new and vital partners. Merchants recognize that all players will need to rely on each other to ensure the success of any mobile payments ecosystem. With these new partnerships, merchants are signaling that they plan to ensure a strong position in dictating the direction and legacies of this new burgeoning payment ecosystem.
- Kevin Hung
Director of Services
FACTS, STATS, AND INSIGHTS TO TWEET
- Generally, with any new payment tool, the greatest barrier to widespread adoption is the classic “chicken or egg” problem >> Tweet <<
- Consumers won’t sign up for a new payment tool because they are worried that not many merchants will accept it >> Tweet <<
- Merchants won’t invest or take the risk in accepting something new because not a lot of customers have it yet >> Tweet <<
- Starbucks & MCX merchants have a big cust base to offer, other merchants 2 be encouraged to accept Square MCX at POS >> Tweet <<
- Big merchants are putting a stake in the ground in the next seismic iteration of the mobile payments space >> Tweet <<
- The move to mobile payments brings wider opportunity >> Tweet <<