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Future of Finance
New technology is upending everything in finance.
Target CEO Brian Cornell said he’s in talks with Apple chief Tim Cook to allow shoppers to use Apple Pay at its stores—a partnership Target has so far avoided as not to break ties with a group of retailers and food chains that banded together years ago to create their own mobile wallet.
Target’s floated defection (which comes just weeks after Best Buy said it would break rank to join team Apple) should be a blazing sign for America’s retailers to realize that the jig is up: Instead of seeing mobile wallets as an easier, safer way for customers to pay for things, retailers viewed them primarily as a means to cut costs—and that’s a failing strategy when it comes to persuading consumers to change long-standing habits.
It’s time for retailers to drop the fight to control the way shoppers pay for things at their stores and concede to the technology sector, which has shown itself far more capable of designing systems with the customer experience in mind.
Mind you, neither camp has been waging this battle purely for the sake of consumers—there are profits at stake for whoever wins. But the approach taken by retailers has shown they are less concerned with providing a good customer experience than they are intent on finding ways to avoid paying billions of dollars in fees every year to MasterCard, Visa, and American Express for the privilege of accepting credit and debit cards.
Merchant Customer Exchange (MCX) was formed three years ago—its founding members included Target, Best Buy, and Wal-Mart—out of frustration with a decades-long, litigious fight with credit-card companies over expensive fees and restrictions.
Consortium members were required to sign a stringent exclusivity agreement promising not to accept any other forms of mobile payments until MCX created its own payments app, according to people familiar with the group’s conditions. This probably wasn’t too hard a sell; many retailers initially shunned the idea of partnerships with Google, PayPal, and other tech companies, out of fear they would have to part with the valuable customer data they use for marketing.
Then Apple Pay came along with an easy-to-use payments system built right into newer iPhones—and partnered with the major credit-card companies to help the service take off. Merchants would have to keep paying the high fees.
Meanwhile, despite the millions of dollars MCX’s members poured into their efforts, the merchants remained in cutthroat competition with one another and haven’t been able to get any meaningful consumer-facing technology off the ground, payments consultant Cherian Abraham tells Quartz. MCX didn’t respond to a request for comment.
The merchant group did manage to create a pilot mobile app called CurrentC about a year ago, but it was plagued early on by a data breach that leaked customer information. It received terrible, one-star ratings in the Android and Apple app stores from reviewers who called it “clunky.” Then, the technology company that created the app, Paydiant, was bought by competitor PayPal, and the CEO of MCX resigned to “pursue other opportunities.”
Abraham points out that ”the payments game is a long one and it’s far too important to the retailers to find a way to control the payment systems at their stores, even if CurrenC turns out to be a failure.”
But the turmoil at MCX, Apple Pay’s early success, and now Google’s announcement this week that it is overhauling its own mobile wallet with an app called Android Pay, makes it clear that unless merchants shift their focus to what consumers want rather than what will save them costs, they might as well just admit defeat, hand over the reigns of the payments game to tech companies, and move on.