Fourteen major retailers – including well-known names such as Best Buy, Lowe’s, Target and Wal-Mart – are teaming up to develop Merchant Customer Exchange, a smartphone payment application for retail customers.
Together, the members of the Merchant Customer Exchange have sales totaling $1 trillion annually and want to make their voice heard when it comes to setting mobile payment standards.
In addition to payments, the app will offer rebates, coupons and loyalty programs, and should be available for nearly every smartphone model.
Other retail leaders taking part in the initiative are: Sears, 7-Eleven, Sunoco, Shell, CVS, Publix Super Markets and Alon Brands. More members are expected to join the Merchant Customer Exchange group during the next few months.
Highly Competitive Market
The mobile payment market is a crowded one, with Juniper Research predicting mobile payments will rise to $1.3 trillion by 2017.
The Merchant Customer Exchange system is currently in development, but once launched will compete against leading offers from Google Wallet and the upcoming Apple Passbook. Other key competitors include Square, used by Starbucks, and PayPal, with major credit card companies and mobile carriers also hoping to join the market.
Rick Oglesby, a payment expert with Aite Group, told Reuters: "These big retailers [the Merchant Customer Exchange] are doing this because they are not happy with the solutions being pushed on them by the market."
He added that a system developed by merchants for merchants has an advantage over other systems.
There is no projected date for when the app will be available.
Challenges: Clarity, Security
In Asia and other areas, using mobile payment apps is common. In the US, however, it is not yet mainstream.
The crowded market is one of the reasons customers are confused, and analysts say for mobile paying to be successful in the US, each system needs to let customers pay for any item, anywhere.
Security is another major concern. Mobile payments are not as straightforward as other payment methods, with a four key parties – the retailer, the credit card merchant, the app manufacturer and the mobile carrier – playing a part in the transaction.
Mobile payment apps have security features in place, but many consumers are concerned what would happen if a smartphone was lost or stolen.
Key Statistics - World Mobile Payment Industry (source: Renub Research)
- In 2011, nearly 2 billion subscribers worldwide used mobile payment methods.
- By 2014, the mobile payment market is forecasted to surpass $500 billion in value.
- The most important markets are predicted to be Asia and North America; together these markets account for 80% of mobile payment users and 60% of total market share.
- In North America, the United States is forecast to top the mobile payment market and hit $200 billion by 2015.