November 25, 2014
By Marc Fogarty, CPA, CFE
ApplePay made its debut at the end of October and has encountered its first interesting obstacle. Rite Aid and CVS blocked ApplePay from working in their stores. Why? Speculation is that they are in favor of a competing system (CurrentC) that hasn’t yet been released. It is being developed by a merchant consortium known as Merchant Customer Exchange, to which Rite Aid and CVS belong.
The heart of this conflict actually runs much deeper than what it appears on the surface. ApplePay doesn’t track consumer behavior – that is their selling feature to the consumer. The possible future competitor that CVS and Rite Aid support wants to do the opposite. Their selling feature is to the retailer who wants to track consumer behavior so they can better market to their target audience. If retailers choose one payment method over the other for their own purposes, then it wouldn’t matter what the consumer wants. The consumer’s only recourse would be to stop patronizing stores that accept a payment source application that tracks their behavior. (or pay cash?)
What seems like a quick win for retailers could hurt them in the long run if it lowers consumer confidence. For example, if a town increases their rate for parking meters, some customers may decide to shop elsewhere because it’s easier and/or more affordable. Retailers dissatisfied with the decrease in the amount of traffic to their stores may decide to petition a change to get the parking meter rates reduced. This is a clear example of how a proactive reaction in consumer behavior can set change in motion, especially if it is supported by the retailers on a local level.
In the case of ApplePay, the outcome is not quite as clear. Consumers might go to the stores that they are near, or that fit into their schedule, rather than worrying about privacy concerns. Plus, there is the possibility that CurrentC will have the added advantage of loyalty rewards and discounts to shoppers going to the retailers they support. This is clearly the case with current shopper club cards that consumers have used for many years to get store discounts. Even though they know their behavior is being tracked, they are enticed by the discount in exchange.
To Apple’s advantage, they have solved a lot of issues that prior payment systems have had such as ease of use and security. People speaking against CurrentC say it is more difficult to use than ApplePay and does not require a user to unlock their phone to use it, which could be a security disadvantage.
CurrentC will not be available until 2015. In the meantime, ApplePay has time to gain a little ground.