The consortium of US retailers hoping to own pay-by-bonk have signed Gemalto to process their payments, revealing that on-screen bar codes lie at the centre of the scheme.
The consortium, branded the Merchant Customer Exchange or MCX, was launched last August with the intention of hosting a standard platform for mobile-phone payments across some of the biggest names in US retailing. Technical details have been scarce beyond a cross-device philosophy which seemed to exclude the NFC technology embraced by Google and others. The Gemalto deal puts MCX firmly in barcode territory, with a cloud-based wallet akin to Google's effort and 75,000 stores poised to accept it.
Those stores currently handle more than a trillion dollars annually, which is less surprising when one realises that the consortium includes 7-Eleven, Best Buy, Walmart and Target, not to mention Shell and Dunkin', and those brands will be looking to move customers away from expensive-to-process cash and into mobile-phone payments as quickly as possible.
NFC (Near Field Communications) is the technology endorsed by most of the industry, globally, as it allows payments by bonking the phone against a reader and will happily work even when the phone's battery is dead (the cryptographic challenge being powered by induction from the reader). Putting a barcode onto the screen is more cumbersome and, assuming single-use codes, needs ubiquitous connectivity, but works on all but the dumbest of phones and can make use of existing scanner technology.
Critically the barcode will also work on an iPhone, which will continue to be vital as long as Apple refuses to comment on its NFC plans.
It was possible that MCX would embrace something more interesting, such as ultrasonic communications or very small wi-fi hotspots, both of which try to provide the functionality of NFC without the additional hardware required, but barcodes were always the most-likely option thanks to their simplicity and the real question is what relationship MCX has in mind for Visa and Mastercard.
When NFC was first mooted the mobile network operators thought they might take a percentage of every transaction, an idea swiftly quashed by the credit card duopoly. The operators now plan to rent out (secure) space to the credit-card companies, and make money with coupons and loyalty schemes. Google Wallet tried that, but couldn't find any customers and now has a cloud-based system which involves very-short-term credit reconciled as soon as data connectivity becomes available.
Something similar should be expected from MCX, with card details being stored in the cloud and single-use barcodes authenticating payments. It's possible MCX might be planning to take a share of the credit-card cut, but if it can process even a small percentage of that trillion dollars it should be able to negotiate a very favorable deal with the card-issuing companies, and the involvment of well-trusted Gemalto should smooth any negotiations - which are often dependent on the level of security implemented. ®
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