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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 and elsewhere.
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.
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Cash, after all, has its own security problems, no protections, and it’s labor intensive–and that makes cash, the nation’s legal tender, the coin of the realm, expensive to accept. No wonder Wal-Mart wishes we’d all just use our debit cards to buy stuff.
But these days customers don’t necessarily want to pay with cash if they have a choice. Cash is insecure, it’s easy to lose, easy to steal and it’s a tempting target for criminals because it’s hard to trace. For major purchases such as new televisions or even cell phones, cash is problematic. So in these areas, credit cards rule.
The problem with credit cards is that they’re slow because you have to sign for the goods you buy and merchants want to speed up the payment process. Enter Apple Pay. Using Apple Pay is very fast, very easy and requires nothing more than your fingerprint if you want to get that seasonal pumpkin latte and a sausage biscuit.
But Apple Pay has a problem, too. Unless you have an iPhone 6 or 6 Plus, you can’t use it. CurrentC might be a great solution, but it’s not available and it will only work with debit cards and store credit cards as it’s currently envisioned. On the other hand, CurrentC will work with nearly any smartphone, regardless of whether it supports NFC (Near Field Communications) or not.
But the way the CurrentC plan works, you can either accept CurrentC or you can accept Apple Pay, but not both. Accepting only CurrentC means the same thing as not accepting anything since it doesn’t actually work yet. This puts merchants in the position of either turning away business or abandoning CurrentC. Since these merchants have spent a lot of time and money while CurrentC has languished, it’s understandable why they want it to succeed.
But perhaps this is all changing. During last week’s press conference, Dekker Davison, the CEO of MCX, the merchant consortium that created CurrentC, said that the consortium wouldn’t prevent members from accepting Apple Pay, despite contractual language saying otherwise.
That prompted Meijer, a Midwest grocery and retail chain, to decide not to shut down its NFC terminals and to continue accepting Apple Pay, Google Wallet and other forms of contactless payment.
In reality, the delays that have impacted CurrentC, along with rapid developments in retail payment technology, have forced MCX into a position of having to give in to reality. If CurrentC is to survive, it must offer customers something of value so they want to use it. That “something of value” could very well be ease of use, support for nearly any phone and broad acceptance, coupled with the ability to embed loyalty cards.
But CurrentC can’t survive if MCX persists in trying to enforce exclusivity. The time for that has passed. Now, the MCX’s best chance for making it in the market is by being a better solution for most people. But aren’t those the very factors that retailers depend on to stay in business?