Until two weeks ago most people had never heard of the Merchant Consumer Exchange (MCX), a digital payments platform backed by some of the biggest retailers in the US. That’s because their product, an app called CurrentC, hasn’t launched. But when companies like CVS and Rite Aid blocked the NFC readers for Apple Pay and Google Wallet because of exclusive contracts with MCX, the company was suddenly front page news.
After that rough introduction to the mainstream, things got worse for MCX. A security breach let hackers make off with email information on CurrentC users. Consumers descended on the app, slamming it with negative reviews in the App Store and Google Play even though most hadn’t actually used it. Amid all the sturm and drang, the actual product got lost in the controversy.
Earlier this week, we sat down with MCX CEO Dekkers Davidson to get his pitch on why anyone should use CurrentC when heavyweights like Apple Pay are already on the market.
This interview has been edited and condensed for clarity
BP: Why would people or merchants use CurrentC or MCX? What do you get by cutting out the credit card networks?
Pay the cash price at the pump
When you go to the gas station today, you'll often see a credit price and a cash price. And the difference can sometimes be 10, 20 cents a gallon depending on where the price of gasoline is pegged. If you want to go pay for gas, you have to get out, walk into a store, either make the cash payment, or say "I'm going to fill it up" and walk back in.
So here's a world that is possible. You can drive up to the pump, and using low energy Bluetooth, the pump can actually recognize that it's Ben who's pulled up. If you are on the CurrentC network, and you have pre-authorized a certain payment method, the merchant then has the opportunity to adjust and roll back the price at the pump to either a cash price, or something that's much lower than you'd pay with the current credit network.
BP: Your system works with QR codes. I've always found them to be a little finicky and not that straightforward. So how do QR codes work on CurrentC?
On the issue of the finickiness that you report, prior to becoming the CEO of MCX over a year ago, I spent two years building a prototype system. And at first it was tentative and slow, but like any new behavior it pretty much became second nature and relatively easy to use. One of the key things when building the technology we're using is that it's quite forgiving. You don't have to hold your phone at a certain angle with a certain light, it's actually designed to read a QR code pretty quickly and we can demonstrate that to you at some point.
If Starbucks can make QR codes work, we can too
Starbucks is the inspiration and the leader in this space. We all talk about how people put all their attention on Apple Pay, and Starbucks has actually been doing this with QR codes, a solution that's pretty similar to ours, for 5 years. I would say that Starbucks does 5-6 millions transactions a week by using QR systems, about 16 percent of their transactions are with QR codes, and if you try it or watch others try it, it becomes second nature. It becomes very fast and very simple. If it had the problems I think it would have not progressed. Starbucks has shown that you can use QR codes and that consumers embrace them.
BP: There have been a lot of high profile credit card hacks recently at places like Target and Home Depot. One of the things people seem to like about Apple Pay is the anonymity and security. MCX is about sharing information between customers and merchants, but is that something people want right now?
I think every customer will see it a little differently. I think the other pieces of what's really important for consumers is you've got to have a secure system, and I can talk more about that, and a system that also ensures consumer privacy, consumers want the ability in some cases to be totally anonymous to merchants. And if they want that, they'll get that. If they want to reveal more to merchants, they can do that, but it becomes the consumer's choice. But privacy and data security, are table stakes, must have.
"We've identified the source and we're stronger for it."
I think we all are on guard in this world that there are people who will attack systems. We had a partner's whose email system was attacked early last week. You have to be vigilant and you have to be strong, to anticipate that and correct it. In this case, we've identified what was released, which was just email addresses, we've identified the source and we're stronger for it.
We think Apple Pay, which has also embraced the concept of low value tokens as we did three years ago, we're probably in simpatico on that one. I pull out my phone, I hold up my phone with a QR code that says "I am a customer at lane six." Now we've each sent a token and a message to the cloud that says "I am the seller" and "I am the buyer and I want to pay for this transaction with the payment instrument that I've selected in my phone." There's no piece of paper to sign, there's no printout, there's no signature to hand back. There are never credentials in my device at the point of sale, it all occurs in a secure server. So like with Apple, if anyone were to intercept the low value tokens there's nothing they could do with that.
BP: It seems that a lot of what MCX was predicated on was building a more direct relationship between merchants and consumers, but what evidence do we have that they want that? It feels like right now people are at a stage where they've seen a lot of credit card hacks happen at a lot of big box stores. What people seem most interested in right now is this idea of anonymity and security.
Most loyalty cards end up lost in your sock drawer
The average American household is signed up for 18 loyalty programs but they use four, maybe five. It tells me that there's friction for those who don't use the cards that are in their sock drawer or ones that they threw away.
You're probably aware that CVS and Rite Aid, particularly CVS has one of the world's largest loyalty program going. Today, when you go to CVS, you pay and then you have to have a separate conversation about your loyalty program. If you want to redeem, it's a fairly tedious process. And I'm generally someone in a hurry, so for me it's even worse to be in line, behind someone trying to effect this transaction. It involves a lot of stress and anxiety.
So when you show up at the point of sale for any merchant that has a loyalty program, for example it rings up $82.11, and I have $55 of credit I can redeem right now. [With the CurrentC app] I hit a button, $55 is subtracted from the $82.11, and I pay $22.11 and I'm out. I also can see the points are taken out, and also the rewards when they're added in. You can do the same thing with offers, the same thing with coupons, which is you're walking into a store, you have a coupon for Pampers, that says two for one, and you can push the button and activate that offer, at the point of sale it's done automatically.
This puts all the power in the hand of the consumer to make it simple, to make it rewarding and to make it hassle free. So for us, it's a lot more than about payments. Paying by mobile is a flat value proposition, it'll be cool for a while, but we hear from our merchants and they hear from their consumers that they want something that brings it all together, that's what we're doing.
You’re in a tricky spot now because your partners can’t use Apple Pay or Google Wallet, but you haven’t released a working version of your own app to the public. You’ve denied that they would be fined if they worked with other payment platforms. So I guess just walk me through what you think is the best solution there, and what the plan is and why exactly you would make the kind of decision that they did if there's no downside to them accepting Apple Pay.
Look, I'm an entrepreneur, I've run businesses, startup businesses for 20 years. As CEO of this venture, I've never in my career found that you get much mileage when you tell your customers what they can or cannot do. And so we're not operating that way. From MCX's perspective, we're focused on building a compelling, affirmative, value proposition for our merchants or consumers. The respective decisions CVS and RiteAid made, and Meijer made, they have to make the decision that's best for their business.
"There are consequences, so if you decide to not keep the agreement that you made with the other merchants we're not going to put a lot of energy in helping get those merchants launched in the near term."
There are consequences. So if you decide to not keep the agreement that you made with the other merchants we're not going to put a lot of energy in helping get those merchants launched in the near term. We're a small startup venture, less then 100 people, so we're going to focus on those that are keeping connected to one another. So this exclusivity that they've acknowledged is very short-lived, I can tell you it's measured in months, not years.
I would observe parenthetically that I don't think too many people complained when Apple went to market with the exclusive that you could only buy it at AT&T, which was the case for a while, and I think that was a reasonable business decision that Apple made, and they did what was in their best interest, and while Verizon customers may have been disappointed, they has made a choice as well. I think every business has a good sense for whats right for them and most importantly what’s right for their consumers, and they have to make that decision for themselves. And I think that's happened here.