Remember the days when the maître d’ at a fine restaurant would sniff, “We take only American Express”? It was awesome for Amex users and just plain rude for everyone else. These days, just about everyone takes everything and the going credo appears to be, “pay how you want, we just want your money.”
But not CVS, Rite Aid and, maybe, Walmart. They apparently want to turn back the hands of time, disabling or leaving dormant NFC-payments at all retail stores just so they can block an emerging form of mobile payment: Apple Pay.
Since Apple surprised the world with the mobile wallet system in September and finally launched it on Oct. 22, the news has been mostly good. It’s a powerful, secure electronic payment system that seamlessly blends hardware, software, biometric security, broad credit card support and mobile payment mechanics into one incredibly easy-to-use system. (Sorry, Google Wallet, having to enter a pin number is not as easy as putting my finger on the Touch ID pad on the iPhone 6 or 6 Plus I’m already holding.)
There are many good things about Apple Pay, not the least of which is that for over 200,000 merchants (that Apple knew of), Apple Pay just works. The best example of this is the New York City taxi. Hop in a cab that has NFC payment enabled (by which I mean most of them) and even if the driver has no idea what you’re doing, you can wave the phone in front of the card reader and pay for the ride. I did it. It works. This is the obvious model for secure mobile payments.
A short film in which @mirrorpete and I use #ApplePay in a #NYC Taxi.A video posted by Lance Ulanoff (@lanceulanoff) on Oct 10, 2014 at 3:18pm PDT
Unless you’re part of what’s known as the Merchants Customer Exchange, LLC, (or MCX). This collection of roughly 50 retailers (and 110,000 retail locations), including Target, Walmart, CVS and Rite Aid apparently grew tired of the snail’s pace of mobile payment innovation and cooked up their own cross-retailer plan, CurrentC. It’s a bit more complicated than Apple Pay and involves mobile phones, pin numbers, the cloud and QR codes.
When I spoke to Target last month about Apple Pay, it wouldn’t comment specifically on Apple’s new system. Instead a company spokesperson told me they “constantly evaluate new and evolving payment systems — that includes new in-app mobile payment functionality and investing in MCX (Merchants Customer Exchange) to provide an in-store mobile wallet solution for guests.”
That’s fine, though Target is already an Apple Pay partner, albeit one who only uses the in-app portion of the payments system. This lets consumers buy products in Target’s iPhone app using Touch ID and Apple Pay.
Walmart was a bit more forthcoming. It didn't "turn off" NFC payments to block Apple Pay because "we never enabled them in our terminals in the U.S.," said a Walmart company spokesperson.
The retail giant is not participating in Apple Pay and apparently has little interest. It's focus is squarely on MCX and the CurrentC pilot system (it rolls out in full next year). The cloud-based QR code system's appeal for Walmart is obvious, "it's a no hardware investment and accessible by most phones," said the spokesperson. In other words, virtually any data phone with a camera should do.
CurrentC, however, may have one advantage over Apple Pay: the ability to connect directly to checking accounts. If that really lets you bypass credit card companies, then retailers also get to bypass credit card fees. It's unclear if consumers would let any retailer tie into their personal bank account this way, but I can see why retailers might find it appealing.
Now we know why
The fact that MCX partners appear to be rejecting Apple Pay en masse, seems counter to the very name of the group: Merchants Customer Exchange. If it were called Merchants Commerce Exchange, which would suggest its goals are purely monetary, I might understand a tiny bit more. But this decision amounts to the exact opposite of customer service.
As it turns out, however, MCX partners have no choice but to block Apple Pay -- here’s why.
Denée Carrington, a Forrester analyst who closely tracks the mobile payments industry, explained that the members of MCX are also part owners in the LLC (Limited Liability Company) and, as such, all signed off on an agreement that now appears to be biting them in the ass.
“Part of the agreement,” Carrington told me in an email, “is a non-compete: No other mobile payment solution other than MCX's CurrentC can be accepted in-store. There is apparently a loophole around in-app payments, which is why Target is accepting Apple Pay only in-app and not in-store.”
The agreement is not new, which makes it all the more surprising that Rite Aid initially allowed in-store Apple Payments before pulling the plug. “It seems like a big miss -- the left hand didn't know what the right hand was doing,” said Carrington.
Now what?
Target has yet to say what it will or won’t do in regards to NFC-based Apple Pay. When asked for comment on this latest development, all a spokesperson offered is “No changes for us or anything new to share.”
I also contacted fellow MCX partner Walmart for some clarity on its plans. Word is they are falling in line with Rite Aid and CVS. They have yet to reply.
Obviously, this is a terrible idea.
I understand that CurrentC will better integrate retailer coupons and loyalty programs. Apple Pay still has them separated. Loyalty cards and coupons live in Passbook, though you can refill rewards cards in Passbook with a credit card living in Apple Pay. For retailers, the separation means they can’t get all the data they’d like out of Apple’s new system. My take is that if they wait a little while, Apple will solve that integration issue.
The need for customer data is not a good enough reason to block Apple Pay. First of all, customers will still use loyalty and rewards cards because of the obvious benefit to them. So they’ll pay with Apple Pay, but perhaps not before getting an overall bill reduction with their rewards card. For the record, Apple Pay works fine with in-process changes like adding a tip to a taxi cab’s receipt before paying with Apple Pay.
A bleak commerce future
The fact is, Apple just sold at least 10 million Apple Pay-enabled devices. By the end of this year, I be they will have sold 25 million. Is it really a good idea to block mobile payments for that many consumers?
Those customers are going to keep walking up to the CVS counter, their arms full of merchandise, ready to pay with their iPhone. They'll see the touchless payment icon (not invented by Apple) and wave their phone over the device. Nothing will happen and the clerk will have to explain why, over and over again. Ostensibly, even NFC-based Google Wallet purchases would be blocked. Customer frustration has never been an ingredient in retail success.
Here’s what has to happen. The Sphinx-like Target needs to take a stand and lead MCX out of this wilderness. Gather the MCX partners together and change the agreement ASAP. Let everyone pay how they want with what they want, as long as it’s official, secure and beneficial to both retailer and consumer.
Doing so will not hobble CurrentC. That somewhat convoluted mobile payment plan has almost as good a chance for success at Google Wallet, which is to say, no one will accept it until it’s as easy as Apple Pay.
Bonus: Apple Pay: Real World Test