November 12, 2013

A lot of attention has been given recently to Merchant Customer Exchange (MCX), the mobile wallet being built by a collection of retailers. MCX could give retailers the opportunity to play a bigger part in the payments space if it can gain wide adoption among consumers.

But there could be one big problem: some research has shown that a large segment of U.S. consumers don’t trust the idea of a mobile wallet. A September survey of U.S. consumers by Consult Hyperion, an IT consultancy, found that 64% of U.S. consumers said they wouldn’t use a mobile wallet, no matter who the provider was. Even among younger consumers in their twenties and thirties, the survey found that 50% wouldn’t use a mobile wallet.

[See Related: PayPal Is The Most Trusted Brand For Mobile Wallets, Says Survey]

This may be bad news for MCX (and all the other wallet solutions), but it could mean an opportunity for retailers to step into the mobile payments market with their own individual mobile payments apps, says David Birch, a founding director and global ambassador for Consult Hyperion.

“Merchant apps are going to dominate anyway, I believe… it’s hard to see how a third party could come up with a better customer experience than a retailer,” Birch comments.

While wallet apps have yet to gain widespread awareness among U.S. consumers, retailers’ apps with mobile payments capabilities, like the Starbucks app, have had more success. “Right now people are confused about the concept of the mobile wallet. But people like their merchants apps,” Birch notes.

That doesn’t mean that the mobile wallets players are wasting their time in the payments space. Instead of offering customer-facing apps, the wallet providers could provide the back-end infrastructure for the retailers to offer their mobile apps’ payments capabilities.

“You won’t see a MCX app on your phone… but MCX could provide API’s to the merchants to integrate payments into their apps,” Birch predicts. “You’ll have your Walmart app, your Untied [Airlines] app, your Uber app, and underneath they will be using the wallet provider’s infrastructure.”

By leveraging the wallet providers in this fashion, retailers could offer their own payments apps without requiring consumers to enter their payments credentials with each new app they download, and could leverage the wallet provider’s infrastructure for security and authentication, Birch adds.

Jonathan Camhi is a graduate of the City University of New York's Graduate School of Journalism, where he focused on international reporting and interned at the Hindustan Times in Delhi, ...