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Why did Rite Aid and CVS block Apple Pay?

Tracey Samuelson Oct 27, 2014
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Need to pick up a prescription? How about some shampoo or Tic Tacs?

Last week, consumers with the newest iPhones could have used the Apple Pay system to make payments with their devices at their local Rite Aid and CVS.

But no more; those two chains have pulled the plug on Apple Pay, saying only that they’re still evaluating payment options for their customers.

The reversal was poorly executed and a bad idea for CVS and Rite Aid, says Deborah Baxley, a payments consultant with CapGemini.

“It’s already having an effect because the Twitterverse is exploding with disgruntled Apple Pay customers,” she explains. “So I think these merchants are effectively shooting themselves in the foot.”

But she says the impact will likely be more reputational, less bottom-line.

“[The stores are] saying, ‘We control the terminal,’” says Mary Monahan, the head of mobile at Javelin Strategy & Research. “’We control the customer relationship and if you don’t listen to us, then we’re just not going to turn on these terminals.’”

Monahan expects Apple Pay to be successful in the next few years, but says the company will likely need to reach out to merchants.

“Apple Pay doesn’t offer loyalty [programs], doesn’t give the merchant anything to bring the customer back into the store,” she explains. “So Apple’s going to need to add that to really sweeten the pot for these merchants to turn on Apple Pay.”

“Given that we are still in the process of evaluating our mobile payment options, Rite Aid does not currently accept ApplePay,” spokeswoman Ashley Flower wrote in an emailed statement. “We are continually evaluating various forms of mobile payment technologies, and are committed to offering convenient, reliable and secure payment methods that meet the needs of our customers.”

CVS also said only that it’s still evaluating different mobile payment technologies.

But the stores are also part of the Merchant Customer Exchange, which is developing its own payment system called CurrentC. Many analysts believe these stores are blocking Apple Pay to wait for that launch in 2015.

“The best thing you can do if you’re waiting for your system to come online and be a competitor is to make sure that there’s as much hesitation on part of consumers to adopt that new standard as possible, to buy yourself time so that you can actually compete,” says Pai-Ling Yin, a researcher at the Stanford Institute for Economic Policy Research.

She says while this was a bad move for Rite Aid and CVS, it might be the right move for CurrentC.

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