Three years ago, sensing that consumers would soon want to pay for things with their smartphones, many of the country’s largest retailers — including Walmart, Southwest Airlines, Bed Bath & Beyond and Dunkin’ Donuts —decided to build their own mobile-payments system.
But the company they built, Needham-based Merchant Customer Exchange, or MCX, still hasn’t produced the smartphone app at the center of its strategy. And after this week, things aren’t looking very promising.
Best Buy, a leading member of MCX, said Monday that it would soon start accepting the rival Apple Pay app. One day later, MCX announced it had replaced chief executive Dekkers Davidson with an interim leader.
MCX denied the two changes were related, and said it is still planning to launch an early version of its planned consumer app, called CurrentC, sometime this year.
Payments and mobile-industry experts are not so certain.
“I don’t see it,” said Karen Webster, CEO of payments consulting firm Market Platform Dynamics. “I think what’s next is, ‘How do we wind it down?’
“MCX is not near where many of us thought they would be as of mid-2015,” said Mark Lowenstein, director of mobile consulting firm Mobile Ecosystem. “They have been working with their partners for quite some time, have still not launched, and there is still relatively little knowledge about exactly what their approach will be.”
MCX’s troubles illustrate just how difficult it’s been for American business to build a widely used, reliable mobile payments system.
The basic idea seems simple enough: Since people can buy apps, download music, and pay for Amazon deliveries from their smartphones, they should also be able to pay for a restaurant tab or a bag of groceries that way.
But replacing cash, checks, and a wallet full of plastic payment cards has not been easy.
One of the most successful examples is Starbucks, which said its own mobile app accounted for nearly 20 percent of all US payments last quarter. But even extremely well-funded startups like Square and established tech companies like Google and Amazon have struggled to establish a broad market for mobile payments.
Apple, the wealthiest and most important company in technology, captured plenty of headlines for its Apple Pay app, which was introduced last fall. The company’s alliances with big-name sellers, such as Whole Foods and McDonald’s, and payments networks, including American Express, made it seem like the dam holding back mobile payments had broken.
Even Apple’s commanding presence with consumers, however, doesn’t mean people are flocking to the next big thing instead of pulling out their debit cards.
In mid-March, Webster’s firm published the results of a survey suggesting that Apple Pay use was still minimal among consumers nearly six months after the product’s launch. Only 6 percent of the more than 1,000 people surveyed had used the service, with another 9 percent saying they had tried Apple Pay but weren’t regularly using it to buy things. About a third of the people surveyed said they simply forgot it was there.
“There has to be some additional benefit to merchants and consumers, other than just the ‘cool’ factor, for this to take off,” Lowenstein said. “Most people don’t think that pulling out their credit or debit card is that inconvenient.”
Industry experts say the MCX project was probably hobbled from the start by conflicting priorities and in-house competition. Jim Moran, an investor with North Bridge Growth Equity, said that’s a typical problem with broad consortiums within a single industry.
“They’re never set up like a real startup at the beginning. They have too many masters,” he said. “The participants play with some of their cards face up, but not all of their cards face up, because some of them at the table compete against each other.”
Webster said the initial motivation for MCX — to save retailers money on payment-processing fees and guard their relationship with consumers — also hurt its chances. She pointed to the fact that MCX originally required its members to block competing payment apps at their stores, which led to consumers being denied when they tried to use the newly launched Apple Pay.
“Consumers don’t care. They don’t care whether it costs the merchant a penny or $1 million to accept their form of payment. They just want to pay with whatever they have in their wallets,” Webster said. “You have to start an alternative payment scheme on the basis of what it’s going to do for the consumer.”
If MCX has a chance of succeeding, it may lie in partnering with technology companies to help get its dream of a multi-merchant payment app off the ground. In fact, it may not have a choice: Paydiant, a Newton startup that supplied MCX’s mobile wallet technology, was acquired by PayPal in early March.
Moran, who was a Paydiant investor but notes that he is not a PayPal stockholder, said it’s clearly in the best interests of both MCX and PayPal to work together on the still-unreleased CurrentC app.
“This is still a zero-billion-dollar industry right now, and there are going to be a few big winners,” he said. But as MCX stands today, “I think they just became the long shot.”