Is it reasonable to expect companies that spend most of their time at each other's throats would be good partners for a project that involves customer data?
There is merit to the 'coopetition' strategy, such as faster time to market and reduced consumer confusion. But time and again, bitter rivals such as telcos and big-box retailers try to work together only to see their efforts fall apart or vastly reduce the scope of their goals.
Recent examples include the telco mobile wallet ventures
There's a fundamental cultural challenge to these efforts that's harder to fix than a lack of “customer focus.” Companies that compete viciously at their core business, such as MCX founders Target and Walmart, have a hard time putting that rivalry aside, especially when cooperating on data management.
"Building merchant coalitions is really difficult, and MCX attempted to build a platform with some of the most competitive players in the game. It wasn't coopetition as much as it was warring bands attempting to collaborate on a new weapons system that they would all use against each other," said Thad Peterson, a senior analyst at Aite Group. "In that sense it might have been inevitable that it didn't succeed."
MCX took a long time to develop its CurrentC wallet app, and the product never got beyond testing. While CurrentC was still in the lab, rival products such as Apple Pay, Android Pay and Samsung Pay came to market.
At the same time, MCX was also snakebit by early squabbles over exclusivity that hurt interoperability with these newer mobile wallets. There was also controversy over whether MCX's members could support other payment projects or leave the venture, though eventually this conflict was rendered moot by the
"It's difficult for competitors in any industry to collaborate on something that's so customer centric such as mobile payments," said Bobbi Leach, CEO of FuturePay. "Ultimately it's difficult to get everyone's business interests aligned, especially when it involved customer experience around payments."
MCX was also misguided in its goal of cutting merchant costs and controlling data rather than improving the consumer shopping experience, said Jordan McKee, a senior analyst for the 451 Mobility Research Team.
"In particular, collective paranoia over data sharing has all but killed the potential for MCX to be anything more than an alternative payment network," McKee said.
Successful cooperatives must create value for all participants, according to Michael Moeser, director of payments for Javelin Strategy & Research.
In the case of Visa and MasterCard, which banks created, interchange was the currency that was shared among issuers, acquiring banks and the networks to make the cooperative business model work, Moeser said, adding interchange is even shared with consumers through rewards programs that encourage them to acquire and continually use cards.
"This is why these card networks continue to operate successfully today," Moeser said. "MCX aimed to eliminate interchange, which is the actual grease that keeps the card networks working. If no one gets rewarded from using a payment except the retailer, the value proposition to other retailers to support it and for consumers to use it is in the end not very compelling."
The struggles of the cross-industry consortia place the mobile wallets back to the drawing board, leaving banks and tech companies in the best position to expand the market.
MCX, which did not return a request for comment, is altering its strategy to focus more on bank relationships, including its collaboration with
In an emailed statement, Chase said:
We're continuing our discussions with MCX members to bring Chase Pay to market — within a retailer's app, on their website or at their register. Chase Pay is currently live with e-commerce merchants such as 1-800-Flowers, Gerber Life and eBags. We're looking forward to introducing Chase Pay at the point of sale and in-app later this year with Starbucks and other launch partners.
The success and scale of the bank-created card networks suggests banks may be able to succeed in establishing interoperability with mobile payment options.
"The companies best positioned to drive market wide mobile payments are the banks, because they have the customers, and the mobile phone operating systems such as Apple Pay and Android Pay since they have the handset share," Moeser said.
Banks have collaborated on digital payments initiatives in the recent past, such as
But the competitive impulse that hurt retailers could hinder banks as well.
While clearXchange's supporters cover more than half of the mobile banking market, not all large banks participate, and smaller banks and credit unions may prefer their own initiatives. It’s also been hard to get banks together on ‘faster payments’ development.
"The big five [banks] could possibly do this, given their scale, but again there may be a need for interoperability and a common initiative," said Nick Holland, an associate at the Strawhecker Group. "if clearxchange is any indicator of how banks can play nice and get things done, the tea leaves don't read well."
Apple Pay and Android Pay have underperformed their market buzz so far, but are not inhibited by the cultural issues impacting consortia, in part because Apple and Google had already established themselves as platforms for others to work with.
"I'm not saying Apple and Android pay have cracked it either. I don't think they have a clear vision of the end game…and neither is setting the world on fire with consumer or retailer adoption," Holland said. "But they at least have the advantage of unilateral decision making and by association, less opportunity for procrastination and paranoia."
