So, TUAW has a story about Rite Aid – which supported Apple Pay on launch day, disabling it. Several people have reported that Rite Aid’s payment machines now display a message stating “Apple Pay is not supported.” It turns out this is because Rite Aid was never “supposed” to allow Apple Pay to function.
Why is this?
Apple Pay works with most current NFC (Near Field Communications) credit card machines, including those at Rite Aid. However, Rite Aid joined a group of other major retailers before Apple Pay was announced to form a new “universal” payment standard, which they call “CurrentC”. To do this, they turned to a company called Merchant Customer Exchange (“MCX”). They also agreed, for some incredibly misguided reason, to actively NOT allow transactions using NFC payment processors other than MCX, despite the fact their terminals already supported these other payments. It turns out Rite Aid never bothered to program their terminals to reject other payments, and the lack of buzz around Google Wallet and other NFC payment methods allowed them to fly under the radar. It wasn’t until Apple Pay got into the news that it became a thing, and MCX (we assume) pointed out there was a problem here.
One amazing aspect of this exclusive MCX agreement is that MCX is not going live until sometime in 2015. Even better is that fact that MCX doesn’t even use NFC – it’s a different sort of “digital wallet”. This means all the partners (including Walmart, Best Buy, Bed Bath & Beyond, Sears, CVS, 7-Eleven, GAP, Wendys and others) can’t process ANY digital wallet payments until sometime in 2015, and even then, only those MCX will process. Oh, and they can’t process any NFC payments at all, unless the agreement is amended.
It makes you wonder what they were thinking.
Data. Data is the reason this group of very large retailers backed CurrentC. Retailers want to use your purchase history to make intelligent guesses about other things you might want to purchase, and steer you towards them. Google does it. Amazon does it, and now Walmart and Co. want to do it. But to make that happen, they need two things: as much data as they can get on you, and an App. Google Wallet gathers a lot of data, but Google wants it for themselves – they are an advertising company, after all. Apple Pay gathers no purchase data, and uses tokens which prevent retailers from tracking your history. Retailers needed another option, so they created CurrentC. Those who back CurrentC hope that a short-term loss of sales will pay off in the long run if their new standard takes off. And they’d probably be right – if it took off, but we’ve seen this story before.
Way back when iTunes was launched, digital music was the wild-west. Napster was the dominant player in the space, and in those days, Napster was not a store, it was just a P2P sharing network. Apple went to the record companies with a pitch to actually sell music digitally. Some got on board, and others fought the change, because they wanted to retain control of their market. When iTunes demonstrated success selling digital music, some of the holdouts created their own online music stores, but they didn’t have the critical mass and the insistence on DRM doomed the space. Finally, after many years of lost sales, the music industry largely realized they had to drop DRM from digital downloads, and legit music sales took off, to the point where iTunes has sold more than 25 billion songs in the last 10 years.
The “digital wallet” space is likely to play out similarly, and Apple will play a major role in it. There are more than 500 million iPhones in the world (though only new phones support Apple Pay in stores), and Apple had 800 million credit cards on file before the launch of Apple Pay. If I were Walmart or Rite Aid, that’s not the kind of competition I’d volunteer to go against.
CurrentC is writing checks their digital wallet can’t cash.