CVS, Rite Aid Kick Apple Pay to the Curb


Consumers who had been using Apple Pay at CVS and Rite Aid received a rude shock over the weekend when the chains turned off the technology at their stores across the U.S.

Apple Pay enables mobile payments using the latest iPhone models or Apple Watch.

The technology underlying it — NFC, or near field communications — allows transactions to be performed on a point-of-sale terminal with a tap or wave of a phone. Both Apple Pay and Google Wallet use NFC for mobile payments.

“At this time, CVS/pharmacy cannot accept Apple Pay or other mobile payments that use NFC technology,” CVS spokesperson Mike DeAngelis told the E-Commerce Times. “We are in the process of evaluating mobile payment options for our customers.”

Rite Aid reportedly said it is in the process of evaluating its mobile payment options.

Those options include a competing mobile payment system, CurrentC, slated to be rolled out next year by the Merchant Customer Exchange, which counts CVS and Rite Aid among its members.

Battling Payment Systems

CurrentC is seen by some technologists as a less elegant approach to mobile payments than Apple Pay. The MCX solution requires a phone to be unlocked, an app launched, a QR code to be read through the phone’s camera, and then waiting while a transaction is processed. By contrast, Apple Pay requires a tap or wave and the transaction is finished.

CurrentC, though, has some perks for merchants that Apple Pay doesn’t. It collects data from its users that can be used for targeted advertising. It supports rewards programs and in-store specials, too. What’s more, it can be tied to debit transactions so credit card fees can be avoided.

Mobile in-store payments are expected to balloon over the next five years, from US$1.8 billion in 2013 to $189 billion in 2018, according to BI Intelligence. Competition to grab a piece of that action will be hot.

“We would expect competition, but we wouldn’t expect that one week you can use Apple Pay at the stores and the next week you can’t,” said Patrick Moorhead, founder and principal analyst of Moor Insights and Strategy.

“That’s a bush league move by CVS and Rite Aid to cut off consumers from an alternative payment method,” he told the E-Commerce Times.

Exclusivity Required?

Because CVS and Rite Aid have been so tight-lipped about their decision to suspend NFC support, there’s some thought that legal complications may be involved.

“What I think is happening is we’re ending up with a conflict between an organization that wants an exclusivity agreement (MCX) and one that wants wider adoption (Apple),” said Carl Howe, an independent mobile analyst.

“MCX requires that its system be the exclusive method for mobile payments, and Apple doesn’t have that requirement,” he told the E-Commerce Times, “so merchants are being forced to choose sides with the exclusivity agreement.”

Industry-backed solutions designed to spur mobile payments aren’t new, although they have had one thing in common thus far: They’ve failed to grow the market.

“Mobile payments haven’t taken off at the point of sale because of lack of ease of use and awareness,” Moorhead said.

“MCX is going down a route similar to ISIS — the payment scheme that the mobile carriers came up with,” he maintained. “That certainly didn’t take off.” Last month ISIS changed its name to “Softcard” to avoid confusion with the terrorist group in Iraq and Syria.

Apple vs. Google

It may all boil down to philosphy.

“In many ways, this is Apple versus Google all over again,” Howe said. “Google’s model is to take profit from advertisements based on information it gathers about consumers. Apple’s model is they make profit from selling devices.”

It remains to be seen which model will win the hearts and minds of consumers. One thing for sure, though, is the road ahead for Apple Pay will have some potholes.

“People were assuming that once Apple got in the market, it would take over with no resistance,” Howe observed. “That’s not going to happen.”

However, the CVS setback won’t be a momentum crusher, he said. “It’s a speed bump more than anything else.”

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