Will retailers trump Google and Isis to win the mobile wallet wars?

If I had a dollar for every company vying to dominate the future of mobile payments, I'd have enough cash to launch my own m-commerce startup. A matter of days after the likes of Google (NASDAQ:GOOG), PayPal, Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA joined forces as the Mobile Payments Committee, an effort to tackle challenges like technology standardization and interoperability, regulation and public policy, and merchant and consumer education, the segment grew even more crowded this week when more than a dozen leading U.S. merchants announced they will create their own nationwide m-commerce network, dialing up the pressure on rival initiatives like Google Wallet and Isis.

The new Merchant Customer Exchange aligns big-box retail chains Walmart, Target, Best Buy and Sears with 7-Eleven, Alon Brands, CVS Pharmacy, Darden Restaurants, HMSHost, Hy-Vee, Lowe's, Publix Super Markets, Shell Oil and Sunoco--companies which together account for roughly $1 trillion in annual sales. That's pretty much all we know for certain: The MCX partners said only that they are developing a mobile app supporting smartphone-enabled purchases across all participating merchants, bolstered by consumer offers, promotions and retail programs. MCX declined to reveal additional details but promised the app will be available across virtually all smartphones--a hint it may rely on HTML5 over native app experiences, or perhaps programmable Near Field Communications stickers. Beyond that, the alliance didn't reveal a launch date and hasn't even hired a CEO, although the hunt is on.

The Wall Street Journal first reported on the MCX initiative in early March--according to sources, retailers are displeased by the inroads made by interlopers like Google and the Isis operator triumvirate, and want to reclaim control over the customer experience. It goes without saying that merchants are far behind the m-commerce curve: Google Wallet has been up and running for more than a year, and Isis is slated to begin consumer trials later this month. And let's not forget that PayPal already offers mobile wallet services at national chains including Home Depot, Abercrombie & Fitch and Jos. A. Bank, or that Square users are processing more than $6 billion in payments on an annualized basis.

But let's also not pretend that mobile payments have evolved too far or too fast for retailers to catch up--merchants may have ceded some control over the consumer experience, but the mobile wallet wars will be fought on their home turf. In fact, home-field advantage could be the decisive factor here: Companies like Walmart and Target didn't get where they are without learning a thing or two about what makes shoppers tick, and that gives them a significant competitive edge when it comes to rolling out mobile services that their shoppers want to adopt. "I do believe that retailers are uniquely qualified to address what we believe are consumer desires in this space," said Terry Scully, president of Target's financial and retail services, in an interview with The Wall Street Journal.

Walmart alone poses a massive threat to the existing m-commerce hierarchy. It's the biggest retailer in the world with 2012 revenues of $447 billion, and currently ranks third on the Fortune 500. The Statistic Brain site reports that more than 100 million consumers shop at Walmart every week, spending $36 million in its stores every hour of every day--that's an average of 8 cents of every dollar spent in the U.S. going into Walmart's pockets. If those 4,253 Walmart locations are effectively off limits to Isis, Google Wallet, Square and others, the repercussions would be enormous, especially if Target, Best Buy, 7-Eleven, Shell and Sunoco also choose to shut their doors to non-MCX payment apps.  

Those are some big "ifs," of course, and MCX is saying little about what it will or won't do next. "We're open to all partners, but it has to be beneficial to member merchants in a way that improves the system and doesn't layer on additional costs," Mike Cook, Walmart's corporate vice president and assistant treasurer, told the Journal.

The biggest "if" of all remains the question of whether consumers are even ready to make the great leap forward into the m-commerce future: "The real issue is the need to convince the consumers that this system is somehow better/easier/more valuable than just taking out the plastic card they already carry that's used everywhere and transition that function to their phones," Michael Gartenberg, an analyst with research firm Gartner, recently told Wired. Walmart, Target and other MCX partners simply have more tools at their disposal to make that argument, like in-store marketing, staffer assistance and mobile wallet-exclusive bargains. They're still at the core of the retail experience, which could leave Google, Isis and other players on the outside looking in.--Jason