NEWS ANALYSIS: CurrentC isn't necessarily doomed despite predictions, but a great deal must be changed for the payment system to survive in today's retailing world.
The advent of the holiday season isn't looking great for brick-and-mortar retailers. Many of the biggest are so worried about sales that they've launched Black Friday, the traditional start of holiday gift buying, a month early—on Halloween.
Retail market analysts are reporting that initial rosy sales predictions are probably wrong, according to reports in Bloomberg
Fueling the consumer gloom are worries about the economy, jobs and security. Buyers are continuing to be worried about credit card security breaches to the point that Target revenue dropped dramatically after its data breach of late 2013.
In the meantime, online retailers are prospering to the point that organizations with both, including Wal-Mart, are slowing the expansion of their big-box brick-and-mortar stores to focus on selling online.
You'd think that when faced with this kind of gloomy holiday outlook, merchants would do whatever they could to bolster in-store sales. You'd be wrong. We already know that two major drug chains started turning away shoppers
who wanted to use Apple Pay, Google Wallet and touchless credit cards. The reason was to preserve loyalty to CurrentC, an alternate payment system spearheaded by Wal-Mart.
The problem is that CurrentC isn't widely available yet and despite three years of effort, it won't be available until sometime in 2015. So why turn away shoppers now? That's an interesting question.
In the case of Wal-Mart, it's to reduce the percentage of sales charged for credit card processing, which amounts to 2 to 3 percent of any credit card transaction. But what about the others? There it makes much less sense.
I spent the weekend thinking about this while I was doing two things seemingly in conflict. Shopping at Wal-Mart and eating fattening breakfast food at McDonalds (love those sausage, egg and cheese biscuits).
At Wal-Mart, I bought merchandise using my EMV-equipped MasterCard. At McDonald's, I used Apple Pay. Both means of payment are secure, easy and fast. Both businesses paid a credit card processing fee when the charges went through.
As I strolled through the Christmas decorations at Wal-Mart, buying paint rollers and trash bags, I also paid attention to what people were using for payment. Most of the time it was cash, part of the time it was EFT cards for government assistance, and much of the rest of the time it seemed to be credit cards.
It's easy to see why Wal-Mart wants CurrentC, which, as it is currently envisioned, depends on customers using their debit cards and the ACH (Automated Clearing House) network.
ACH payments are fast, inexpensive and reliable. Unfortunately, they offer no protections against fraud and they have no specific legal protections of the kind that credit card networks have. In other words, there's nothing protecting a customer against someone taking money from their bank account if it's an ACH transfer. But it's very low cost.
How cheap is it? Well, using ACH payments, such as you would with debit cards, are much cheaper than accepting cash.