CVS, Rite Aid & Walmart Block Apple Pay
Data over Customer Privacy
by David Bernard and Joanna Smith
Managing Directors of DB Marketing Technologies
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.
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