Retailers Unhappy with Apple Pay

                Apple released Apple Pay on October 20, 2014 as a new mobile payments system that was deemed more secure than a credit card and much quicker to use as it relies on simply tapping your iPhone on an NFC reader at checkout. Aside from the retails announced by Apple that officially support Apple Pay, it appears that you could use Apple Pay at several retailers that already had NFC readers at checkout for other services like Google Wallet or contactless credit cards. These unofficial retailers include Walmart, Kmart, 7-Eleven, Best Buy, Rite Aid, and CVS. It sure is interesting why some of these retailers are deciding to explicitly stop Apple Pay in their tracks. Apple Pay sounds like a great idea to make payments secure and easy for the consumer, so why stop supporting Apple Pay?

                The main reason that retailers like Rite Aid and CVS recently decided to stop supporting Apple Pay, requiring customers to provide an alternate method of payment at checkout is that they are actually building their own mobile payment app called CurrentC. Interestingly enough, there are many banks that are supporting Apple Pay as they believe it will encourage more credit card purchases, but there are zero banks supporting CurrentC. Of course, banks will not want to support a system that cuts on their profits, specifically credit card processing fees. CurrentC is backed by a number of retailers such as Dunkin’ Donuts, Lowes, Stop & Shop, and nearly all major US gas station chains which will make it quite a competitor to Apple Pay.

                Now, the question is whether CurrentC will have a chance to go mainstream or will Apple Pay win the race. In my opinion, I don’t think CurrentC will win because banks will be unwilling to support it and people will be required to pay directly from their checking accounts or with a store debit or credit card. Basically, the app will encourage people to get credit cards with the different stores they shop in and I believe people have enough credit cards as it is. Also, I’m not a big fan of paying directly from my checking account because if fraudulent charges arise, your account can be frozen during an investigation period and you will not have access to your own money, unlike with a credit card which would just prevent you from borrowing money from the bank. Apple Pay seems to be the more secure way to go and I think that a similar system should be opened up to other smartphones that run Android and Windows Phone to really let it take off.

                Retailers are always looking to cut costs and sometimes that requires creating a separate ecosystem in which customers have to tie themselves up in instead of being able to use systems well accepted by other stores. Understandably, CurrentC would cut out the banks as the middleman by avoiding credit card processing fees, but it would require customers to sign up for store cards or provide their checking account information which does not sound as simple as enrolling your existing credit card with Apple Pay. The release of Apple Pay is already starting another battle in the mobile payments war to determine the future of credit cards. In the end, the consumer will  have to decide what platform they want to stick with and hope that it survives.

References:

http://www.theverge.com/2014/10/25/7069863/retailers-are-disabling-nfc-readers-to-shut-out-apple-pay