Drugstore chains take a bite out of Apple Pay

Mitchell Hartman Oct 27, 2014
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Drugstore chains take a bite out of Apple Pay

Mitchell Hartman Oct 27, 2014
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After rolling out Apple Pay with much fanfare on October 20, Apple has now hit a snag with its new mobile-payments system. And it’s not a technical problem. Rather, several major retailers don’t want to play ball and aren’t enabling mobile payments using Apple Pay in their stores. They include Wal-mart and Best Buy, and as of this week, CVS and Rite Aid.

The drugstore chains, which have not commented publicly on their recent decisions to shut down trials of Apple Pay in their stores, apparently favor a rival mobile-payment system that is in development now, and will be rolled out next year by a group of major retailers—including Wal-mart, Target, Lowes, Best Buy, Gap and others. That system, named CurrentC from the Merchant Customer Exchange (MCX), will bypass credit card companies. The payments will be made on a customer’s debit card, accessing their bank account, says technology analyst Ben Schachter at Macquarie Securities.

“It certainly feels like they’re going to push to disintermediate not only Apple and Google, but also the credit card companies,” said Schachter. “They clearly don’t like paying those credit card fees.”

Schachter expects Google to launch a mobile-payments system for Android smartphones soon, piggybacking on the near-field communication technology that Apple Pay uses to send payment information between a smartphone and a retail checkout terminal.

Consumers may not embrace CurrentC when it is launched, says IT and marketing professor Anindya Ghose at NYU’s Stern School of Business. He said Apple Pay—which requires a smartphone wave and a fingerprint—offers a high level of financial security.

“Your credit card number is never revealed in any way to the merchant or anyone else in the system,” said Ghose. “It’s encrypted completely and secured. So the chances of a fraud are dramatically reduced.”

Apple Pay also keeps customers’ purchasing data more private. The rival store chains want that data to push coupons and special deals to customers via their smartphones.

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