We’re not there yet, but after years of discussion and slow progress, mobile payments are heating up. Google was an early-mover with last year’s introduction of its digital wallet product, but the company’s progress has been slow, in part because the service requires specially-equipped phones. The space is becoming crowded. Last week, coffee giant Starbucks announced a deal with Twitter co-founder Jack Dorsey’s startup Square to accept the company’s mobile payments at some 7,000 Starbucks-owned U.S. locations, beginning this fall. On Wednesday, the WSJ broke news that a formidable group of retailers including Walmart, Target and Best Buy plans to introduce a mobile payment option of their own, called Merchant Customer Exchange.
American business giants are finally getting serious about the idea that consumers should be able to use their mobile phones — devices that are now central to our lives — at the cash register. Wednesday’s news about Merchant Customer Exchange (MCX) means that America’s largest retail giants feel a growing sense of urgency to get in the game and face upstart tech companies like Google, PayPal and Square. “What we are looking for is a broad, seamless experience across all retail formats,” Terry Scully, Target’s president of financial and retail services, said in comments cited by Reuters.
The mobile payments space is like the old Wild West right now, with entrenched financial-payment giants squaring off against new actors jockeying for position in advance of an ultimate showdown. Each major player in this fight carries at least one competitive advantage. Google: Android, the world’s top mobile OS. Isis: AT&T, Verizon Wireless, T-Mobile, telecommunications infrastructure. PayPal: Pioneering online payments business. MCX: Massive retail exposure with Walmart, Target and Best Buy. Square: Jack Dorsey and the Square team. It’s like a “High Noon” multi-player-media game for geeks.
The MCX system, in which consumers would download software onto their phones and then tap their device against a reader at checkout to make a purchase, was first reported by The Wall Street Journal. The system is still in its early stages and does not have a launch date, the paper reported. But an executive search is under way to find a CEO for the new venture. Merchant Customer Exchange is in talks with banks, tech companies, and telecom firms to develop an infrastructure for the new system, Scully told Reuters. “While speed to market is important, we really are focused on doing it right,” Scully told the news agency.
Market analysis firm Juniper Research expects that mobile payments will increase four-fold to reach $1.3 trillion by 2017. But that will only account for 4% of total global retail sales, the group said, suggesting truly massive upside potential for cashless payments.
In March, online financial services giant PayPal announced its own mobile payments service, called PayPal Here. PayPal’s mobile payments reader plugs into a smartphone headphone jack. Square, which announced the deal with Starbucks last week, uses a similar auxiliary device — sometimes known as a dongle — that also plugs into a smartphone. As part of that agreement Starbucks will invest $25 million in Square, and the coffee titan’s CEO Howard Shultz will join the company’s board of directors.
In another high-profile mobile payments effort, some of the biggest telecom companies in the country, including AT&T, Verizon Wireless, and T-Mobile are working on their own system, called Isis, which will begin local trials later this year in Salt Lake City and Austin, Texas, according to The Journal. Google Wallet, a big Isis rival, is already accepted at Home Depot, Office Depot, Macy’s, RadioShack, and other retailers. But Google’s use of near-field communication (NFC) technology, which requires a special chip that only a relatively small number of U.S.-based phones carry, has thus far hobbled consumer adoption of Google Wallet.
As the mobile payments field grows more crowded, the big companies behind MCX are trumpeting their retail experience as a competitive advantage. “As merchants, no one understands our customers’ shopping and payment experience better than we do, and we’re confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient,” Mark Williams, president of financial services at Best Buy, said in a statement.
Competition means more innovation and faster progress as the various players jockey for position. That’s good for consumers — it should mean lower prices — and suggests that a cashless option at the register, beyond credit and debit cards, may become ubiquitous sooner than many have expected.