Evan Schuman's StorefrontBacktalk

The secret sauce for beating interchange is ACH. That, at least, is the plan of the Walmart-led Merchant Customer Exchange (MCX), according to sources familiar with the payment system being developed by the retailer consortium. By using ACH transactions to debit bank accounts or credit lines instead of going through payment-card brands’ networks, MCX expects to reduce transaction cost to as little as four cents—and cut Visa and card-issuing banks out of the loop.

MCX still hasn’t revealed most of the details of the system, but some things are becoming clear. Others are still up in the air—like whether banks will accept a few pennies per transaction when an ACH withdrawal typically costs them more than that. Also, will banks want to get into such an effort, knowing the toxic politics surrounding any effort to knock out Visa and MasterCard?

The much more fundamental issue for MCX is whether it can come up with—and agree to fund—a compelling reason for shoppers to participate. That, coupled with what some retailers—namely, those who have been pitched—see as an overly aggressive approach, has prompted some to question whether MCX can deliver the interchange relief it promises.

One example of the pitch approach some have cited: MCX demanding $30,000 from retailers just to see the official PowerPoint. (That slide deck must have some amazing images.) Although charter members were asked to kick in $1 million to join, retailers are being asked to give $500,000 or $250,000.

Chains are also being asked to commit to three-year mobile payment app exclusivity, meaning they won’t support any non-MCX mobile payment other than any mobile payment app they have already deployed. (There’s a one-year grace period from the start of membership—where retailers can get out of the deal—and that period is about to expire for most of the initial backers.)

One CIO of a major chain, who sat through the MCX salespitch (he declined to pay for the PowerPoint but the consortium showed it to him anyway—or at least a version of the slides), said he declined to join because of what he perceived as the sketchiness of the plan. “It didn’t seem to be that real,” the CIO said. “Paying a quarter of a million to get into a club to fight the banks seemed like a fool’s errand to us. What percentage of people are ready to pay with their phone?”

The group publicly confirmed at NRF that it planned on using QR codes for its approach but didn’t specify how the codes would be used. It’s now being described as the QR code identifying the shopper. The shopper would pay by launching the retailer’s app—or the MCX app, which would be marketed under a more consumer-friendly name—and the QR code would be scanned by the associate at the POS. The shopper’s mobile app and the POS would be connected in the cloud, which would get the shopper to confirm the account and then the associate would be told the purchase has been completed.

Some involved have said the initial launch will be a decoupled debit card, but one retailer who is very active in MCX said it would also act as a credit card, albeit one riding over ACH. That approach would be similar to Walmart’s current private label card through GE Capital.

The question of whether there will be a credit card option is crucial. Although debit card transactions—especially at Walmart—are soaring percentage-wise, the risks to the consumer are light years less with credit cards and the associated zero-liability programs. In theory, a zero-liability program could be created for debit cards, but it would mean banks agreeing to not bounce any transactions until they had established that no fraud is involved.

That’s because even if banks ultimately reimburse a shopper all monies stolen by thieves, the damage perpetrated by inappropriately bounced checks can be permanent and extensive. A credit card zero-liability incident grants a temporary credit, and the shopper is not hurt.

Although zero liability is always a nice benefit for consumers, the perception of greater security risks with mobile payments will make it essential. This is true even though mobile payments are actually more secure than today’s magstripes and even EMV.

When it comes to shopper fears, perception trumps reality every time. Fear is based on the unknown, and there’s nothing today more unknown—to shoppers—than mass mobile payment.