Yosemite's small-scale take on MCX uses blockchain instead of ACH

Blockchain technology provider Yosemite X is following the spirit of the mega-retailers' disbanded Merchant Customer Exchange (MCX) joint retailer venture, but on a local level.

MCX had grand designs on establishing its CurrentC mobile wallet as a one-size-fits-all ACH-backed payment option for many of the country's top retailers (Walmart, Target, etc.) as a way to avoid card network fees. CurrentC never made it out of its testing phase and folded three years ago. But Palo Alto, Calif.-based Yosemite X has a much narrower focus and is pushing just a payment card (plastic or virtual) rather than an entirely new mobile app.

Yosemite X says it has launched a blockchain-based Yosemite Card in the Palo Alto region for small businesses and, initially, for Stanford University students and other consumers in Palo Alto who would want to apply for it. Yosemite is positioned as a credit card with no transaction fees for the merchants, who in turn can put those savings toward rewards programs.

Card users self-issue any amount of stablecoins — digital coins linked in value to mainstream currency — up to an established line of credit to initiate transactions. The blockchain account is accessed via a QR code printed on the card's back, with a one-time password delivered through a button on the card.

"The Yosemite Card does not link to a bank account, but we are working to integrate with existing services in the future," said Max Jungreis, head of strategic partnerships for Yosemite X.

As the initial applicants for the card, Stanford University students must provide a valid university e-mail address and their online banking information.

"We only require bank account information for certification purposes," Jungreis said. "When we link a consumer's bank account to their Yosemite Card, it is so we can immediately confirm the identity of the individual during the signup process."

In a Yosemite Card transaction, the blockchain replaces the role of current credit card companies and payment processors, Jungreis said, operating as a "decentralized mechanism to allow a direct transaction between a consumer and merchant." The card functions as a credit card with a pre-assigned credit limit.

When applying for a card, a consumer undergoes internal credit assessment methods to establish credit limit, while also agreeing to make payments on the card's settlement dates.

"Stablecoins exist in the broader marketplace of options voted upon by system stakeholders, and there are no uniquely privileged parties trusted by the system to offer stablecoins," Jungreis said.

"Any party can offer a stablecoin by maintaining deposits of reserves," Jungreis said in explaining how a merchant can be confident of payment. Making the reserve audit information public builds enough trust in the blockchain community to vote on the coins as a currency to be accepted in the system for transaction payments, he added.

In the Yosemite Card service, the public blockchain is used to record all credit transactions and issue IOUs that represent customers' intent to settle.

Merchants partnering with Yosemite to accept the new card are provided with a tablet pre-configured for their place of business. Yosemite Card does not require a special device or reader because stores may choose to run the application on existing tablets or phones, Jungreis said.

"We started accepting Yosemite Card because we were tired of excessive card transaction fees eating at profits when a better option exists," said Howie Bulka, founder of Howie's Artisan Pizza, a Palo Alto-based franchise. "It's truly exciting to partner with a company driving innovations that streamline our business and save us money, without sacrificing customer satisfaction."

Future updates of the Yosemite Card will include the ability to complete e-commerce transactions.

The development and launch of the Yosemite Card comes at a time when other major payments stakeholders are increasingly dabbling with alternative payment methods. Square is forming a crypto team to further study bitcoin, while JPMorgan Chase launched its own JPM Coin on the bank's blockchain as a secure payment option in its wholesale payments business.

Yosemite X will also look to avoid the fate of another payments company that used Stanford University students as a key element of its launching pad in the past.

The payments industry was abuzz over the Clinkle mobile payments company, created by Stanford student Lucas Duplan eight years ago. The startup triggered an enthusiastic response from investors in Silicon Valley at a time when several tech companies were stirring the mobile wallet pot.

Clinkle, which hired various former Netflix executives, never launched a viable product and three years ago investors were seeking ways to get their money back.