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CVS, Rite Aid & Walmart Block Apple Pay
Choosing Customer Data over Customer Privacy

by David Bernard and Joanna Smith Bers,
Managing Directors of DB Marketing Technologies

You've probably heard all about Apple Pay - the super secure and easy to use payment vehicle that's built into Apple’s Passport app. Consumers load their credit card info into their phone and with the touch of a button - and fingerprint authorization - they can make purchases over their phones. And if they have Apple’s newest iPhones, they can use Apple Pay to purchase at any retailer with NFC payment terminals. Even better for the customer, credit card information is never passed to the merchant. With all of the data breaches in the news, any innovation that keeps consumer credit card info from POS systems is great news for consumers and will send them running to use the new app.

On the other hand, you’ve probably also heard that CVS, Rite Aid, Walmart and other merchants are rejecting Apple Pay by turning off their wireless payment terminals.  How can this be?  Why would they do this?

As we noted earlier, Apple Pay does not pass along a customer's credit card number at the point of sale, just payment authorization. So merchants can't identify who is doing the buying. While managing customer data is a big responsibility, the analytic and marketing benefits of having this data is of enormous value to merchants.  Losing transaction data is a deal breaker for most retailers. While security is important, most merchants would choose government  fines and months of customer credit monitoring resulting from a data breach in exchange for precious POS customer data. 

So while Apple Pay is great for the consumer, it's not so good for the merchant in its current state. Merchants would much prefer a payment app that fosters data collection and even reduced or eliminated credit card transaction fees. And that is why CVS, Rite Aid and Walmart signed on with Merchant Customer Exchange.

Merchant Customer Exchange (MCX) was founded in 2011 and is a consortium of about 40 merchants that wanted to build a mobile payment system called CurrentC that allows merchants to keep their data, and reduce/eliminate transaction charges.  At the time, Apple Pay wasn’t anywhere near rolling out and Mobile Payment systems such as ISIS (now Softcard) and Google Wallet were barely useful.  But for this system to work, the merchants had to stick together, eschewing the competing systems even before the MCX CurrentC system launched.

And many MCX merchants fell in line, blocking Softcard and Google Wallet transactions.  But not all. There have been some retailers that have adopted the other mobile apps in the absense of the merchant-friendly solution. And that didn't raise too many eybrows. Until now. With the launch of Apple Pay, which has the potential to become ubiquitous very quickly, retailers are taking note and making a statement by ripping out their NFC terminals.

Here's the problem. CurrentC is less secure and requires consumers to have payments pulled from their bank accounts, meaning that even more of a consumer's personal information becomes at risk in the payment system. Most consumers would rather not do this. To answer this challenge, MCX has alluded that CurrentC will also allow credit card payments in the system. Here's another problem. It is highly unlikely that credit card transaction fees with CurrentC will be lower than Apple Pay. Apple Pay’s architecture was designed to be accepted by credit card issuers like Visa as a  “Card Present Transaction” commanding the lowest possible rate. Given CurrentC's less secure technology, analysts predict higher fees for the MCX system. Merchant members are not going to be happy about that.

So really it is all coming down to customer data. The real benefit of CurrentC is CRM - theoretically as it hasn't even launched yet. Merchants get direct access to customers' purchasing histories. And that is no small deal. Except when you consider that the only adjustment a merchant need make with Apple Pay is to ask the customer for a telephone number, reward card, or some other identifier at the point of sale that will enable the clerk to link consumers to their purchases - at least until Apple Pay figures out a way to link up with merchant reward programs. Merchants like pharmacy giant Duane Reade already do this. You can't get through a credit card transaction without the clerk asking for your telephone number.

So while a merchant-friendly mobile payment solution is highly desirable, it also has to be one that consumers will embrace. In the absense of such a mobile payment solution back in 2011, CurrentC had much potential. But now as Apple Pay and other mobile apps launch, CurrentC has its work cut out for it - when it launches.

For more information about CRM Integration or  how DBMT® can help your group operate more efficiantly without cutting marketing programs, please email us at info@dbmt.com or call us at 212-717-6000. We'll make your CRM infrastructure work, no matter the budget.


CC Customer Data over Privacy  


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