Apple Pay, the Silicon Valley giant’s highly anticipated mobile wallet, has been available for only one week, but already might be inciting a battle within the payments industry.
Over the weekend, Rite Aid and CVS disabled Apple Pay from working in their stores nationwide. The reason was not immediately clear.
Ashley Flower, a spokeswoman for Rite Aid, said the company “does not currently accept Apple Pay.”
She added that Rite Aid was “still in the process of evaluating our mobile payment options.”
Analysts said disabling acceptance of Apple Pay was a way to favor a rival system that is not yet available, but is being developed by a consortium of merchants known as Merchant Customer Exchange (MCX). Rite Aid and CVS are part of that consortium, not part of the group of retailers that had teamed up with Apple Inc on its payment system.
Nonetheless, over the week, Apple Pay technology was working in Rite Aid and CVS stores.
“Clearly Rite Aid and CVS are making a business decision over a customer satisfaction decision,” said Patrick Moorhead, president of Moor Insights & Strategy.
He added that the move could upset consumers who believe Apple’s new product is easier and safer than paying with a traditional credit card.
Apple declined to comment on the stores’ action.
An executive at MasterCard Inc, which has teamed with Apple on its new system, said Rite Aid and CVS made the wrong decision.
“We think consumers should have the ability to pay any way they want,” said Ed McLaughlin, chief emerging payments officer at MasterCard.
“Rite Aid and CVS have been accepting contactless payments for quite a long time,” McLaughlin added. “We look forward to them turning the functionality back on in their stores.”
Apple has not released data on how popular its new product is.
However, on Apple Pay’s first day, at Chase banking services seven times more people added Chase credit cards to Apple Pay than signed up for new credit cards, Avin Arumugam, Chase’s digital executive director, said in an interview.
A lot is at stake. MCX’s payments system helps merchants to keep track of customer shopping habits across the dozens of merchants who plan to accept the payment product. That is a potential treasure trove of data for retailers, who wish to better target consumers with deals and loyalty programs.
This also gives retailers the potential ability to cut credit card companies out of the payments process entirely. MCX’s system, CurrentC, is set to be linked to a consumer’s debit account, according to the company’s description of the product. By bypassing credit card companies, MCX merchants could potentially save money on the fees they pay per transaction.
MCX retailers include large chains like Best Buy Co Inc, Gap Inc and Wal-Mart Stores Inc. Overall, they represent more than US$1 trillion in annual sales, 110,000 total stores and more than one-fifth of total US retail sales volume, according to the coalition.
Technology companies like Google Inc and PayPal, as well as mobile carriers like Verizon Communications Inc and AT&T Inc, have all tried — and failed — to persuade consumers to pay for products with their smartphones.
However, many believe that if any company can gain consumer adoption quickly, it is Apple.
“Apple actually has a really good shot at being successful here because they’ve solved a lot of fundamental issues that others haven’t in the past,” Moorhead said. “In particular, the user experience issue. It’s simple, easy and secure to use.”
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