Apple Pay and CurrentC: Opening salvo in the mobile payment war

A few weeks ago Apple announced Apple Pay a virtual wallet with which shoppers can pay by tapping their phone on in-store NFC readers. Apple promised (and according to experts, delivered) a secure, anonymous, easy-to-use payment system. Last week it launched and hundreds of tech bloggers started eating at McDonalds just to see if Apple Pay would work there (it did.) Of course, user acceptance is one half of the story. Stores also need to set up compatible registers and adopt the technology. I said then that even though consumer adoption and retail acceptance is an uphill battle is a battle, if anyone can do it, Apple can.

Fast forward to Saturday when a group of major retailers called MCX merchants, including CVS and Walmart, announced that they would not be accepting Apple Pay in their stores but would be developing a mobile payment of their own called CurrentC. That move and the system was widely derided by the tech industry who said that it is not secure as Apple’s and truly unwieldy to use (QR codes? Really?) I’ll take their word for it.

Coins: the old wallet.

Coins: the old wallet.

Aside from the problems with CurrentC, there a problem with Apple Pay adoption that we really should consider. Apple Pay may be the product that consumers want but it’s not the product that retailers want. Retailers want two things: to know everything possible about their customers by tracking every purchase and to reduce the fees they pay to the credit card companies on each transaction. Compared to current credit card payments, Apple Pay is not an improvement on fees and it is a step back into darkness for customer data. It also requires an investment in infrastructure and training. Do Apple and consumers really expect retailers to be happy by getting less information and paying for it? It’s not surprising at all that some are choosing to abandon it.

Pando Daily said that “the move by CVS, Rite Aid, WalMart and other MCX merchants to eliminate support for NFC payment is an act of fear, rather than strength.” I agree completely: they are afraid that not only will they end up paying the same fees to credit card companies for using Apple Pay but they will lose purchase information. Apple has 41.9% of the smartphone market in the US and 58% of American adults have a smartphone. Assuming that the smartphone market share is proportionate across age groups, this means that almost a quarter of all adults are iPhone owners! Sure, they don’t all have the latest iOS which supports Apple Pay but it will still be a significant chunk of customers who expect to be able to pay with their phone. The MCX merchants should be afraid.

Pando added: “If these retailers think they can offer a truly better payment experience – spoiler: they can’t – then they should compete on the grounds of delighting their users and driving adoption that way.” Here’s where I disagree. Yes, they should provide a better product if they hope to create adoption but they don’t have to: the existing system (paying with an actual, plastic credit card) still works and customers are already used to paying with it. There’s no need to immediately adopt a mobile payment solution.

In the short term, will customers abandon the MCX merchants because they cannot use Apple Pay there? I doubt it. The question is what will happen in the long run: will consumers (and Apple) get the mobile payment system they want, or will the retailers win? In any case, this will be an interesting product war to follow.

 

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