Apple Pay Gets Some Pushback

A few weeks ago Apple launched its new electronic payment system utilizing the iPhone 6 called ApplePay.  Many consumers and retailers, increasingly concerned about credit card fraud, looked closely at this new way of paying for items.   Apple Pay is promoted as a much more secure method of paying for everyday items and services than traditional credit or debit cards alone.  While your traditional credit card or bank account does indeed get charged for your purchases using Apple Pay, the retailer never actually gets your card number.  For each purchase you make, Apple Pay generates a unique single-use code that your iPhone sends wirelessly to the retailer’s cash register.  That code is used by the retailer to retrieve payment from your account.  Again, this code is only for that specific purchase and does not contain your real credit or debit card account information, password or account number.

When first announced, Apple listed several major stores that would accept Apple Pay and listed as partners most of the major credit card companies and large national banks.  It looked like Apple may have again scored big with another game changing product.

Well, another 800 pound gorilla had yet to weigh in.  Last week Walmart and a few other large national chains have formed a consortium that is pushing another mobile payment system that is not compatible with the Apple system.

I guess it was inevitable that there would be more than one player in the billion dollar electronic payment industry.  Merchants for years have bridled under the charges that the major credit card companies, e.g., American Express, MasterCard and Visa, have levied on customers’ purchases.  Fees of 2 percent or more are customary.  With many big box, high volume stores operating at single digit profit margins, these fees are painful.

Led by Walmart, some large national chains like Best Buy, CVS and Target, are promoting a new mobile service called CurrentC to be launched next year.  It will not use the Near Field technology employed by Apple and some Google payment systems.  Rather it will use QR codes, and more importantly be platform agnostic.  In other words, you won’t need an iPhone.

It is much too early to predict which one of these competitors will win. It may be that both will co-exist.  There may well be one or more other entrants into the fray since billions of dollars are on the line.

If the stores behind CurrentC can establish a new payment system that is not dependent on Visa or MasterCard, that does not require fees paid to these thirds parties and that opens up a trove of consumer behavior information, the Holy Grail of retailing will have been found.

In the end it the consumer will decide.  I remember many years ago when certain retailers and restaurants would only take one credit card.  So if you had a Visa and the store only accepted MasterCard, you were out of luck.  Other than some major events like the Olympics and the Super Bowl, where only one card is honored, most places take most any plastic you can provide.  The same will be true for competing mobile payment systems.  Much to their chagrin, the McDonald’s down the street or the gas station on the corner will have to take your money whatever way you want to give it to them.