Long before Apple Pay, big retail stores were creating a way to avoid paying the typical 2% to 3% fees paid to credit card processing companies. They called it Merchant Customer Exchange (MCX), and created a mobile payment app called CurrentC.
Retailers hoped that if enough them used MCX, they would be able to avoid paying credit card fees by processing payments through Automatic Clearing House transactions, which go through bank accounts with smaller fees. CurrentC uses QR codes on a cashier’s screen or a phone. Read about CurrentC on Business Insider, and on Tech Crunch.
Former Walmart CEO Lee Scott said, “I don’t know that MCX will succeed, and I don’t care. As long as Visa suffers.”
While CurrentC is highly unlikely to catch on, here is the truth in today’s world:
1. Everyone has to pay Visa/MC interchange, even the worlds largest retailers.
2. But you don’t have to pay 2-3% to a card processor. The actual interchange is much lower, you just have to get the processors hand out of your pocket
3. These “solutions” are all merchant focused, but they ultimately rely on the consumer, and the consumer wants convenience.
4. Consumers don’t care about saving Walmart or Exxon a couple percentage points.
5. This program relies on debit cards and bank accounts. Americans use credit to sustain their lives. People like to borrow money and get rewards for doing so. People may not want to use their debit card for a large transaction
6. When customers use a credit card they generally spend more money on each transaction. By forcing them to use actual money in their bank account you could negate this over spending effect. This is often overlooked when accounting for interchange fees.
7. Retailers will lose business if they stop accepting credit cards.
8. Fewer than 1 million people have the alternative, Apple Pay, on their phones. There are about 600 million credit and debit cards in the US, but only a tiny fraction of retailers accept Apple Pay. Retailers like Walmart are already refusing to accept it.
I once viewed this MCX exchange as a long term threat to the processing industry but the more I read, the more I realize that they are missing the point. The point is that consumers want to use credit cards, and retailers should find the cheapest way to take them.
Credit card processing companies charge high fees because credit cards are easy for customers to use, and customers like using them. They also provide security and other services to customers and merchants.
So the best thing for retailers to do is to find the cheapest way to accept credit cards – based on their business needs. Give us a call today or request a quote today.
Quick FAQs about MCX
Q: What is MCX and what was its purpose?
MCX, or Merchant Customer Exchange, was a consortium of major U.S. retailers formed to develop a mobile payment system aimed at reducing credit card processing fees. They created a mobile app called CurrentC to facilitate transactions through bank accounts, which incur lower fees compared to traditional credit card transactions.
Q: How did CurrentC work as a payment system?
CurrentC used QR codes displayed on the cashier’s screen or on a user’s phone to process payments. The transactions were conducted through the Automated Clearing House (ACH) system, which allowed for lower fees compared to conventional credit card processing.
Q: Why did MCX and CurrentC fail to gain traction?
CurrentC faced several challenges, including consumer preference for credit card convenience, the complexity of using QR codes, and competition from more established mobile payment systems like Apple Pay. Additionally, consumers were not motivated to switch to a new payment system to save retailers money.
Q: What was the reaction of major retailers to MCX and CurrentC?
While some major retailers supported MCX and CurrentC in hopes of reducing processing fees, others were skeptical. Former Walmart CEO Lee Scott famously remarked that the goal was to make Visa suffer, regardless of MCX’s success. However, the reliance on consumer adoption was a significant hurdle.
Q: How do credit card processing fees affect retailers?
Retailers typically pay between 2% to 3% in credit card processing fees, which can significantly impact their profit margins. MCX aimed to reduce these fees by promoting ACH transactions, which are generally cheaper.
Q: What is the current status of Apple Pay adoption?
As of recent data, Apple Pay has seen significant growth with approximately 60.2 million users in the United States alone. However, its adoption rate among retailers varies, with some major retailers like Walmart choosing not to accept it.
Q: Why do consumers prefer using credit cards over systems like CurrentC?
Consumers prefer credit cards because they offer convenience, security, and rewards. Credit cards also allow users to borrow money and manage cash flow more effectively. The additional benefits and protections provided by credit card companies make them a preferred choice over alternative payment systems.
Q: What are the benefits of accepting credit cards for retailers?
Accepting credit cards can lead to higher sales volumes, as customers tend to spend more when using credit. Additionally, credit cards provide security features and fraud protection, which can reduce the risk for both retailers and consumers.
Q: What should retailers do to minimize credit card processing fees?
Retailers should seek out payment processors that offer transparent, low-cost pricing models.
Q: Is there an alternative to paying high credit card processing fees?
While alternatives like MCX and CurrentC attempted to bypass high fees through ACH transactions, they were not successful. The most effective strategy for retailers is to find cost-effective credit card processors that offer lower fees without sacrificing convenience or security for customers.
