How Chase is tackling mobile payments

Unlike many banks, Chase is focused on mobile payments, with its four-month-old Chase Pay product.

Late last week, it acquired MCX, a retailer consortium with members like Walmart, Target and Best Buy, its second mobile payments acquisition. Three months ago, Chase partnered with LevelUp, a mobile payments app geared at smaller retailers on the East Coast. The MCX deal is not surprising; Chase announced its Chase Pay product in October 2015, a full year before it became available to its customers, and said at the time that it would be using MCX’s technology.

“The [MCX] deal provides Chase with an important entry point into many of the largest merchants in the U.S., as well as the appropriate technology to integrate with those outside the MCX consortium, but does not guarantee its prospects for adoption,” said Jordan McKee, a principal analyst in 451 Research’s payments practice, in a report on the acquisition.

Retailers in the MCX network are some of the largest in the U.S., which should help drive Chase Pay activity. Those companies don’t accept rival wallets like Apple Pay, so Chase doesn’t appear to be in competition for consumers. However, Chase offers its businesses fixed pricing without the usual fees for interchange, merchant processing or network processing, which would make Chase Pay more appealing to businesses than its rivals, but consumer adoption of any mobile payments still hasn’t really taken off.

There are many reasons mobile payments haven’t reached their tipping point yet. They’re not seamless; placing a mobile device in exactly the right position can be trickier than it should be. It’s hard to make new payments technology run on old, rusty rails. The development of payments infrastructure, at least in the U.S., has been too slow to keep up with consumers’ current standards for fast and secure payments. As payments become increasingly sophisticated, hackers do too and new features meant to tighten data privacy in payments can only be useful for so long.

Existing mobile payments experiences are also inconsistent with each other and none are widely enough accepted to lessen some of the friction, which slows adoption down even more. Every experience is so different; there are different apps to log into, different passwords to remember; some let you authenticate with your fingerprint, some don’t; some pay functionalities live in their own apps, some require you to access it from inside a larger app. There isn’t one single experience where a user can pay multiple ways at a single location.

“The [MCX] consortium became so myopic in its obsession with circumventing the card networks’ transactions fees that it entirely lost sight of how CurrentC would add value for consumers,” McKee said. “Its strategy began to further unravel as members such as Walmart strayed course and launched their own mobile wallets.”

With LevelUp, customers who have downloaded the app link their credit or debit card and scan a QR code at checkout to pay for their items. Their purchases at a single retailer are bundled into a monthly bill that the customer pays later, thereby lowering card fees for the retailer. The payments process has not always been smooth, mostly due to the technology hardware involved.

However, LevelUp also offers a rewards scheme through its retail partners. They vary from one place to another but they generally award you a discount in a dollar amount after spending a certain amount at a given place – you could unlock a $10 credit at a favorite coffee shop after spending $80 there, for example. They’re small rewards, not like racking up points to use when purchasing your next big vacation, but it’s the kind of incentive that other mobile wallets need to change consumer habits, which is ultimately what will allow mobile payments to take off.

If Chase offered the kind of incentives LevelUp offers within the network of MCX merchants, it could bring what’s been missing in mobile payments to a scale.

Now if only Chase’s next payments move would move away from the old QR code.

WTF is the MCX?

explaining common fintech jargon in simple language

What is the MCX?

The MCX , or Merchant Customer Exchange, is a consortium of U.S. retailers founded in 2012. The group created a a merchant-owned mobile payment app, now known as CurrentC.

The MCX website currently lists 63 merchants in the consortium, including many of the largest retailers across various sectors,including 7-11, Bed Bath and Beyond, Kmart, Exxon Mobile, Walmart, Gap, and Olive Garden.

Why was the MCX created?

Depends who you ask. Some would say CurrentC was created for customers. As retailers release their own proprietary mobile payment apps, consumers don’t want to download multiple payments apps, so CurrentC was created to simply things. The aspiration is that the app will work at all retail locations.

Another popular theory is that the MCX was created by merchants to combat interchange fees and third party mobile wallets. Merchants and banks are stuck in an endless battle over the fees banks charge merchants for card processing, known as interchange fees. CurrentC utilizes gift cards and ACH to fund accounts, circumventing credit card companies and removing interchange fees from the equation.

The technology powering CurrentC provides further evidence of merchants trying to eliminate all outside payment sources. CurrentC uses QR codes for payments, not the newer NFC technology. Mobile wallets like Apple and Android Pay utilize NFC technology and are powered by credit card APIs, cementing card interchange fees into a merchant’s daily life.

Its been a few years now…why hasn’t CurrentC been released?

There has been beta testing of CurrentC, but the MCX’s mobile payment app is in a rough place now. CurrentC got hacked in October of 2014, and there have been some concerns over privacy issues. Not being able to get it together pushed a few retailers to jump ship and create their own mobile apps or open up their systems to mobile wallets like Apple and Android Pay. Walmart, CVS, and Kohl’s are only a few of the retailers that have created their own mobile payment products.

MCX has gotten some bad press since its founding. Trying to passively cut out mobile wallets like Apple Pay and create a merchant-exclusive mobile payment app has rubbed some customers the wrong way.

Some would argue CurrentC was doomed from the start, and was only a power play against banks and third party wallets. It’s difficult enough to create a mobile payment app for one store with a good user interface. But creating a single app that fills the needs of over 60 retailers, ranging from restaurants to gas stations to big box stores, seems damn near impossible.