That Was Fast! Major Retailers Disabling Apple Pay

Yeah, so about the entire world rolling over and playing dead when Apple announced its new mobile payments system: that was a tad premature.

The general reaction when Apple announced its Apple Pay initiative could be summed up in two words: game over. But reality turns out to be a bit more complicated and competitive than all that.

The banks which own Mastercard and Visa evidently saw Apple Pay as a way of extending the life of their potentially threatened franchise. But what they and Apple failed to reckon with was the merchants’ desire to own a slice of the mobile payments market. Not only is it lucrative, they were monumentally unexcited about ceding any more information and power to another competitor. For all of its ‘aw shucks, we’re just here to sell technology’ rap, Apple has clearly seen the benefits accruing to Amazon and Google from the aggregation of data. How long was it going to be before they entered that contest, denials of interest to the contrary?

It is apparent that no one yet owns this space. Lots of major players, including Google, have tried and so far failed to corner the market as they have in search or as Amazon has in ecommerce and Apple in music. But everyone sees the opportunity. It’s just that realizing it is going to be a tougher slog than they might have imagined – or hoped. JL

Dante D’Orazio reports in The Verge:

The fight for control of the mobile payments market is opening a rift between merchants and banks. Banks and credit card companies have enthusiastically supported Apple Pay, seeing it as a way to increase the number of purchases people make with their credit cards. But Apple has struggled to get merchants on board. There's a lot of hype around Apple Pay right now, but not everyone is on board with the new mobile payments system. In fact, a significant number of merchants, including heavyweights like Walmart, Kmart, 7-Eleven, and Best Buy, are in outright competition with Apple Pay. The retailers, through a joint venture formed in 2012, are building their own mobile payment app, called CurrentC. It's expected to launch next year. In the meantime, these retailers have no intention to support Apple Pay.Following Apple's announcement last month, both Wal-Mart and Best Buy confirmed to The Wall Street Journal that customers would not be able to use the system in their stores. Earlier this week, a leaked internal memo from Rite Aid revealed that the drug store chain was modifying or disabling its NFC readers, preventing access to Apple Pay (and other systems, like Google Wallet and wireless carrier-backed SoftCard, which also depend on the contact-less technology). A representative later confirmed the news to iMore. Today, CVS followed suit and shut out Apple Pay, according to reports. Both will support CurrentC on launch next year. The companies have not immediately returned requests for comment.

Moves by Rite Aid and CVS effectively block Apple Pay in their stores

The fight for control of the mobile payments market is opening a rift between merchants and banks. Banks and credit card companies have enthusiastically supported Apple Pay, seeing it as a way to increase the number of purchases people make with their credit cards. But Apple has struggled to get merchants on board. A quick look at Apple's website explaining the service highlights just 34 retail partners that support the system. Eight of those are different flavors of Foot Locker. One is Apple itself.

Retailers are seeking to use mobile payments to cut out credit card companies

Meanwhile, not a single bank backs CurrentC. That's because the system is designed to cut out the middleman — and credit card processing fees. The app, when it launches next year, won't replace your plastic credit card. Instead, it will withdraw directly from your checking account when you pay at the cash register with a QR code displayed on your Android or iOS device. Or you can pay with gift cards and "select store debit and credit cards" (read: just the ones issued in partnership with CurrentC backers). In exchange for not using your credit card, the retailers plan to offer exclusive coupons and promotions to those who use the app.

The notion of a widespread payment system controlled by retailers and free of credit card processing fees is very appealing to merchants. It should come as no surprise, then, that, in addition to Wal-Mart, the largest retailer in the world, CurrentC's partners include Gap, Old Navy, 7-Eleven, Kohls, Lowes, Dunkin' Donuts, Sam's Club, Sears, Kmart, Bed, Bath & Beyond, Banana Republic, Stop & Shop, and Wendy's — as well nearly all the major US gas station chains — among its ranks.

We'll have to wait until next year to see how well CurrentC can compete in the crowded battle for control of mobile payments, but until then, don't be surprised to see more retailers follow Rite Aid and CVS and shut off their NFC readers.