Mobile payments have not been very popular in the United States until recently. Google Wallet launched back on May 26, 2011, but has not garnered a significant amount of traction. Apple released Apple Pay on October 20, 2014, and suddenly seemed to make mobile payments more relevant.
The idea of Apple Pay is that it is your digital wallet. It stores your credit and bank cards right in your phone. If a retailer is set up to accept mobile payments, you simply put your phone up to the NFC (near field communications) reader and then use your fingerprint to authenticate. It is as simple as that. No fussing around for a credit card and no handing the card to a retailer’s employee. Apple Pay is being applauded for its security and privacy aspects. The system uses tokenization when you make a payment, which means it generates a unique set of numbers every time you make a transaction. This means there is no risk in your credit card number being stolen, since each set of numbers can only be used one time. The merchant also receives zero information about the purchaser. They only get the unique set of numbers, no names or identifiers are stored about the transaction so it always stays private. This has many consumers extremely happy but also has put retailers on the offensive.
In the week following the release of Apple Pay, several major retailers began pulling support for it. Both CVS and Rite Aid disabled both Apple Pay and Google Wallet from being used in their stores, even though they had compatible equipment that would allow for them. Neither store made a public comment as to why they did this, but many have assumed it is because of the MCX (Merchant Customer Exchange) group. The group is working on a new mobile payments standard called CurrentC. The group is made up mostly of large U.S. retail chains, who are afraid on losing out on valuable consumer information. If you use the CurrentC app, merchants will be allowed to track what you buy and store that data. The CurrentC standard is significantly more complicated and removes the privacy protections that Apple Pay has in place. CurrentC currently only works with checking accounts and not the credit cards which most Americans frequently use. This is the retailers way of getting around the significant amount of credit card processing fees they pay. The system also requires QR codes to be scanned in order to make payments. A stretch from the simplicity and security that Apple Pay and Google Wallet offer.
Apple Pay will continue to thrive as users will see its enhanced security measures as well as its ease of use. CurrentC is extremely beneficial to the retailers but there is no benefits to the consumers. MCX will have to offer extreme incentives if they want to have any chance of persuading consumers to use their standard.
Sources:
http://www.slate.com/blogs/business_insider/2014/10/28/apple_pay_retailers_like_walmart_will_lose_using_currentc_will_lose.html
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