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.
CVS, Rite Aid Chains Kill Apple Pay in Favor of Proprietary System
Likewise, credit card customers can challenge what they claim are fraudulent charges. Because CurrentC is debit-card based, consumers don’t have those protections, and while banks will usually not make customers pay for fraudulent charges, there’s no requirement that they do this.
In addition, because of the way CurrentC is structured, customers are responsible for charges if their phone is lost or stolen. There’s no protection against fraudulent use, such as Apple Pay provides by requiring a fingerprint. While CurrentC will tokenize the transaction in a manner similar to Apple Pay, it doesn’t offer real protection for consumers against the transfer of otherwise private information.
This means, for example, that any health-related information collected by CurrentC can be passed along to anyone else that MCX wishes to pass it along to. Apple Pay, by contrast, passes no personal information to merchants, not even the customer name.
Understandably, the credit card companies are less than thrilled by the action of CVS and Rite Aid. “We believe that people should be able to choose how they want to pay. We are disappointed that both Rite Aid and CVS have decided to block their customers from using the payment method of their choice by turning off the convenience of contactless acceptance terminals and declining transactions made with contactless, including Apple Pay,” a MasterCard spokesperson told eWEEK via an email message.
“Acceptance of all payment methods whether a physical card or a contactless-enabled device provides customers with the ability to conduct a secure transaction in the way they choose,” the spokesperson wrote.
MCX did not respond to repeated attempts for a comment.
The move to block contactless payments including Apple Pay and Google Wallet are apparently part of the deal that goes with setting up CurrentC. The deal reportedly includes a requirement that participants in MCX not accept any other mobile payment method. Because of this, the drugstore chains apparently decided to pull the plug (although neither company is commenting as yet).
However, the requirement may not be universal. Target, for example, is a member of MCX, but is also a launch partner with Apple for Apple Pay. No doubt Apple Pay’s security has trumped any deal with MCX, considering Target’s battered credit card history. In this case, Target provides a positive example by showing that it’s certainly possible to support both methods.
There is, of course, no technical reason why Apple Pay and CurrentC are mutually exclusive, but that’s because the real reason is a self-centered attempt to reduce consumer choice by forcing businesses to pick one or the other. It doesn’t need to be this way, at least not unless you’re a huge retailer that’s more interested in having a couple of percent more added to the bottom line than in providing customer satisfaction.