Apple Pay, the new mobile payments system from Apple, is barely a week old, but it is already being attacked by the merchants it is supposed to be making things easier for.
The war over mobile payments may be in its early stages, but it is one big retailers are poised to lose by not playing along with Apple.
On Saturday, the pharmacies Rite Aid and CVS disabled Apple Pay from their stores, even though they have the compatible equipment that was working when Apple Pay launched last week. They also blocked Google Wallet, a similar system for Android phones that Google launched in 2012.
Neither Rite Aid nor CVS will specifically say why it decided to disable Apple Pay, but it seems to be because each is part of the Merchant Customer Exchange, a consortium of the biggest retailers in the US. MCX happens to be working on its own mobile payments app, CurrentC, which is in beta testing and is expected to launch next year.
But by all accounts, CurrentC is a mess and much more difficult to use than Apple Pay. For starters, it works only with your checking account, meaning you can't load your regular credit cards as you can with Apple Pay. It also requires you to scan a barcode to make payments, something proved to not be as secure as near-field communication and other encrypted technology used by Apple Pay and Google Wallet. Finally, CurrentC will allow merchants to track what you buy and store that data, something Apple Pay doesn't allow.
MCX's public relations department, CEO, and COO did not respond to multiple requests for comment. CVS' statement Monday confirmed only that the retailer would not accept Apple Pay and would launch its own mobile payments system soon, presumably CurrentC. Rite Aid has not yet made a statement.
But the drug stores' move and MCX's impending mobile payments app is already ruffling feathers at Apple and its credit-card partners like MasterCard.
"They've taken away an option from consumers, and they haven't done anything to replace it," said James Anderson, MasterCard's senior vice president of emerging payments, in an interview with Business Insider. "You'd think they would've had something in place. But we're happy to compete with it."
Apple's public take on the dispute is much more diplomatic, but the implication is clear: Early feedback of the system from customers and retailers is really good, and the retailers that are not joining or that are finding ways to block Apple Pay are going to miss out.
Here's what an Apple spokesperson told Business Insider on Monday:
The feedback we are getting from customers and retailers about Apple Pay is overwhelmingly positive and enthusiastic. We are working to get as many merchants as possible to support this convenient, secure, and private payment option for consumers. Many retailers have already seen the benefits and are delighting their customers at over 220,000 locations.
It's a competition the MCX retailers are ultimately going to lose.
As John Heggestuen of Business Insider Intelligence points out, customers are already asking for what Apple Pay provides. They want a solution that's secure, available where they shop, compatible overseas, and available on the devices they love, namely the iPhone.
There's no evidence CurrentC can provide all of that.
Then there's the statement from Wal-Mart, one of the big leaders of MCX, on why it won't accept Apple Pay. Emphasis added:
There are certainly a lot of compelling technologies being developed, which is great for the mobile-commerce industry as a whole. Ultimately, what matters is that consumers have a payment option that is widely accepted, secure, and developed with their best interests in mind. MCX member merchants already collectively serve a majority of Americans every day. MCX’s members believe merchants are in the best position to provide a mobile solution because of their deep insights into their customers’ shopping and buying experiences.
Apple Pay may not be widely accepted yet, but it uses technology that is relatively easy for retailers to implement. It's also secure, arguably more secure than a credit card because your credit card number isn't actually stored on your phone. It also works only with the user's fingerprint, so unless a thief is able to get your phone and chop off your thumb, you don't have to worry. And it's simple to set up and use.
There's also a strong chance that while credit-card companies are open to trying different payment platforms, they might not partner with MCX's CurrentC. According to two sources familiar with major credit-card companies and their plans for mobile payments, CurrentC might not use the same kind of secure technology that encrypts your credit-card number as Apple Pay does. So while credit-card companies may be open to trying new things, their reception might be a bit chilly toward CurrentC if it's clear that it won't be safe for customers to use.
It's clear that the retailers of MCX are digging their own graves. Two of them have eliminated a viable mobile payments system without providing an alternative. The rest have chosen to ignore Apple Pay altogether. And it's all resting on CurrentC, a payments app that's more difficult to use and potentially not as secure as Apple Pay.
The most likely scenario: MCX retailers will go ahead and launch CurrentC. It'll be a dud. And before long, Apple Pay, Google Wallet, and similar mobile payment methods will become the new standard.
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