Retail giants such as Wal-Mart have publicly questioned the benefits of Near Field Communication mobile payments. Many don’t see the long-term value and are hesitant to make hardware and software upgrades at the point-of-sale that could cost millions of dollars. But a report from the Wall Street Journal today reveals several large retailers such as Wal-Mart and Target are working together to form their own mobile-payments system to compete with Google Wallet and Isis.
Around two dozen merchants are involved in the project says the WSJ, citing people familiar with the plans. However, the details are sketchy, with the identity of most participants, how the system will work, when it will launch and its name all unknown.
The retailers have decided to enter a packed field after surveying the current competition and deciding they can do better, with security and privacy a major concern, Steve Mott from BetterBuyDesign, told the Journal.
In a statement, Target says: “We are exploring potential solutions that would help us to deliver the fastest, most secure mobile-payment experience possible for our customers.”
Recent security issues with Google Wallet (read more here) and consumers uneasiness about mobile payments in general likely spooked retailers into thinking they could develop a more secure system. Whether the retailers use NFC, 2D or QR codes or something similar to what PayPal is pushing at Home Depot remains to be seen.
One option could be something akin to restricted authorization network prepaid cards. Consumers could load funds into something of a “super merchant” mobile wallet and then use those funds to pay only at participating retailers. In that scenario, the onus would be on each retailer to develop incentives to not only increase foot traffic at brick-and-mortar locations but also discourage consumers from using competing mobile wallets. Such a closed-loop system also would reduce card interchange costs, which retailers have fought against for years despite the break they received from debit fees with the Durbin Amendment.
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