Big Retailers Plan Effort for Mobile Purchases

BRIAN X. CHEN
August 15, 2012
The New York Times

Cash, credit or debit? You may one day have far more choices to make at the checkout counter. A group of big retailers, including 7-Eleven, Best Buy, CVS and Wal-Mart, said on Wednesday that they were forming a company that would offer a way for customers to pay for purchases with their smartphones, joining a wide array of businesses seeking a piece of this market.

Other than announcing the formation of the payment network, to be called Merchant Customer Exchange, the companies gave few details about how their mobile system would work or when it would be released. They said that their payment application would be available for virtually any smartphone, and that it would use a secure technology to process transactions.

Fourteen companies so far have agreed to help develop the mobile wallet system, and more are expected to join the alliance later.

“We believe that merchants are in the best positions to deliver mobile payments to billions of people,” said Michael A. Cook, vice president and assistant treasurer of Wal-Mart. He said the merchants in the group, which have $1 trillion in annual sales, knew people’s shopping habits and payment preferences, so it made sense for them to work together.

The announcement came a week after Starbucks said it was teaming up with Square, a start-up company that lets people make purchases with their smartphones. Howard D. Schultz, chief executive of Starbucks, joined Square’s board. Some speculated that this partnership risked alienating other big retailers, like 7-Eleven, by giving Starbucks influence over how Square’s payment system was developed.

In addition to Square and similar start-ups, many types of businesses are hoping to make a grab at the mobile wallet market, including phone carriers, credit card companies and big tech companies like Google and Microsoft.

While competition in a market is typically a good thing, giving consumers many different options to make a mobile payment could leave them baffled. Charles S. Golvin, a Forrester analyst who focuses on mobile technology, said that in order for a mobile wallet product to gain traction, it would need to be an open system that allowed customers to pay for anything, anywhere.

“You need to remove this possibility of the customer scratching their head as they walk in and saying, ‘Gee, I wonder if I’ll be able to pay here with X, Y or Z?’ ” he said. “That consideration, if it’s present, is a buzzkill.”

Mr. Golvin said the newly announced merchants’ payment network seemed as if it could gain traction with customers who shop regularly at the businesses that are part of the group. But he added that it did not seem likely to generate a compelling product that would give the idea of mobile payments the push it needed.
“It does not strike me as a driver for the fundamental shift to mobile payments that the industry at large is counting on,” he said.