CVS, Rite Aid Chains Kill Apple Pay in Favor of Proprietary System

NEWS ANALYSIS: Two major drugstores kill off Apple Pay and other contactless payments in favor of a proprietary payment system that doesn't protect the privacy of customer transactions.

Apple Pay Block

Two national drug store chains, CVS and Rite Aid, have turned off their near-field communication terminals to block the use of Apple Pay just a week after the contactless payment system went into operation on the iPhone 6 and 6 Plus.

But this action not only blocks Apple Pay, but also Google Wallet, which the two chains had been supporting for several months along with all other forms of contactless payment systems, including a number of contactless credit cards.

The move by the drug chains has touched off a grassroots effort by users of Apple iOS, Android, Windows Phone and mobile devices to boycott the merchants who are attempting to block Apple Pay and other NFC payment options.

The reason the drug store chains blocked NFC is not related to any technological problem.

Apple Pay worked fine at the stores as did the other contactless payment systems. The reason instead has to do with a cynical attempt by the stores to do what they can to reduce customer use of credit cards.

Their action boils down to a single factor—money. Credit card companies charge stores two or three percent of the selling price for processing the card payments.

Instead, a number of stores have formed a group called the Merchant Customer Exchange, or MCX. The group has created a mobile payment system called CurrentC, which allows customers to load their debit cards and some store credit cards along with their loyalty cards into their phones and use that for payments.

You'll notice that I didn't mention that CurrentC would allow payment using MasterCard, Visa or American Express. That's because the major credit card issuers are specifically frozen out of the mix. CurrentC will also track spending habits, health information, location and other private information and provide those details to merchants to use in marketing.

But there's more to it than just access to marketing data and credit card fees. Apparently there's some real animosity aimed at credit card companies. Former Wal-Mart CEO Lee Scott is quoted in USA Today as saying, "I don't know that MCX will succeed, and I don't care. As long as Visa suffers."

The thing is, Visa isn't really going to suffer. Bearing the brunt of retailer's resistance are their customers, who will lose a significant choice in how they pay for their purchases, and who will, in addition, lose some very important protections and some privacy.

Large retailers such as Wal-Mart and Best Buy currently have to accept a series of federal rules that allow customers to be exempt from responsibility for illegal charges to their credit cards in any amounts exceeding $50.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...