Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
As a complex new technology-based service, Apple Inc.’s Apple Pay was certain to hit some speed bumps after it debuted Oct. 20. Sure enough, reports of glitches surfaced, such as about 1,000 double charges on Apple Pay transactions funded by Bank of America Corp. debit cards. But a more interesting issue has surfaced at drug-store chain Rite Aid Corp., if reports on the popular MacRumors blog are to be believed, and it doesn’t involve malfunctions in the mobile-payments technology itself.
Instead, the issue involves consumer expectations colliding with payments-industry competition. MacRumors, an online publication that follows all matters related to Apple, posted Thursday that “a growing number of Apple Pay users are angry with retailer Rite Aid following the reported disabling of the mobile-payment service within the past 24 hours. Apple Pay should technically be compatible with any point-of-sale systems supporting NFC [near-field communication] technology, but customers who made successful Apple Pay payments earlier this week have found their payments were being denied yesterday and today.”
MacRumors quoted consumers who posted online or via Twitter that they had made Apple Pay transactions shortly after the service went live Monday, but found they couldn’t when they attempted more such purchases later.
Apple Pay works with Apple’s new iPhone 6 models, which have an NFC antenna, and enables contactless payments at the point of sale as well as working online. Rite Aid has contactless terminals in an undetermined number of its 4,600 stores in 31 states and the District of Columbia. Typically, such terminals also can handle NFC transactions. The U.S. has about 220,000 merchant locations supporting contactless transactions, many of them vending machines.
Rite Aid, however, also is a member of Merchant Customer Exchange (MCX), a merchant-controlled company that is developing a non-NFC mobile-payments network called CurrentC. MCX reportedly demands that members accept its mobile wallet exclusively. Citing Twitter reports, MacRumors also said that “the retailer also unexpectedly turned off support for Google Wallet at the same time.” Google Inc.’s mobile wallet relies on NFC technology, as does the Softcard (formerly Isis) mobile wallet backed by AT&T Mobility, Verizon Wireless, and T-Mobile USA. Both have encountered problems building merchant acceptance and consumer usage.
A spokesperson for Camp Hill, Pa.-based Rite Aid did not return calls from Digital Transactions News seeking comment, nor did spokespersons for Apple and MCX respond to e-mails requesting comment.
A consultant familiar with mobile payments, Steve Mott, principal of BetterBuyDesign in Stamford, Conn., said the development lends some credence to those who believe that consumer demand to use Apple Pay eventually will force MCX to abandon its exclusivity policy. “That’s not an unreasonable way to look at things if you’ve been in the payments business,” he says.
But Apple actually may be exposed to a bigger risk than that faced by MCX merchants if some consumers get angry that they can’t use Apple Pay every place they want. Most will simply move on to other payment methods, Mott believes. And despite Apple’s arrangements with hundreds of card issuers and three of the four major payment card networks, individual merchants still decide whether to accept Apple Pay as well as rival services, according to Mott. “MCX has an advantage in that they’ve been able to watch others go in and stumble,” he says.
Mott expects that CurrentC, which has been under development for more than two years, may have a “huge advantage” next year when it finally rolls outs out because its member retailers know “how to manage the consumer experience.”
“I would be amazed they don’t roll out with a well-integrated, hand-holding marketing program,” he says. “If Apple Pay stumbles, there’s no downside for MCX.”
