Sunday, October 26, 2014

Misguided Attempts by CVS and Rite Aid To Subvert Market Adoption of Apple Pay

I agree with Kevin Tofel’s summation of the current CVS and RiteAid decision to wholesale disable the NFC capabilities of their point of sale equipment because they are supporting the merchant-supported MCX platform called CurrentC.
Companies disabling their existing NFC retail terminals just to blunt momentum from Apple Pay or Google Wallet are being shortsighted and are creating a situation that could very well backfire on them. 
- Kevin Tofel
Slash Gear has posted a copy of an internal memorandum that was distributed by Rite Aid management which states the following:
Please note that we do not accept Apple Pay at this time. However we are currently working with a group of large retailers to develop a mobile wallet that allows for mobile payments attached to credit cards and bank accounts directly from a smart phone. We expect to have this feature available in the first half of 2015. 
If customers attempt to pay for a transaction with Apple Pay, a message will prompt both customer and cashier for a different form of payment. Please instruct cashiers to apologize to the customer and explain that we do not currently accept Apple Pay, but will have our own mobile wallet next year.
The Wall Street Journal covered how the Merchant Customer Exchange was first announced more than two years ago - back on the 9th of August 2012.  And this consortium has been trudging away at cobbling together a solution that they have yet to bring to market.  The $5 billion lawsuit Wal-mart filed against Visa Inc likely goes to the heart of the motivation behind MCX (of which Wal-mart is a founding member) and CurrentC.  In Paul Ausick's "CVS Follows Rite Aid, Shuts Off Apple Pay" article, Mike Dudas' Tweet relays that Lee Scott, the former CEO of Wal-mart from January 2000 to January 2009, is reported to have said "I don’t know that MCX will succeed, and I don’t care. As long as Visa suffers." Merchants are looking for a way to eliminate the interchange fees they pay to banks and credit card processors which they currently pass on to consumers.  Their justification is that if the interchange fees are eliminated, then they can reduce their prices by an additional 1.5% to 2.5%.
What I find amusing is how hypocritical the actions CVS and Rite Aid have taken. Consider the following excerpt from the MCX web site.
No-one likes to have their choices limited. So we are building in the freedom to pay using a variety of financial accounts, including personal checking accounts, merchant gift cards and select credit and debit accounts. 
- Davidsond, Dekkers
So members of the MCX are actively prohibiting a method of payment that their customers actually want to use because it stands in conflict to a payment system they support which. They are actively denying their customers access to Apple Pay - a system that has been described as “…the most secure PAYMENTS scheme on the planet.” [Notes]
I guess the “freedom” the MCX wants to protect is the luxury of being able to choose exactly which method CurrentC will use to gain access to your checking account.  Any benefit to consumers that result from participation in the CurrentC is simply fodder for use marketing the service to consumers. Another benefit to participating merchants is that MCX plans to build a profile of consumers and their purchases processed through the system.  Just look at the pitch points for CurrentC:
Thoughtful customer relationship management 
Protect and leverage valuable data to offer your customers better experiences and interactions throughout the path to purchase. 
Secure transactions and customer data storage 
Safeguard every customer transaction through industry-leading security and technology. 
Prominent marketing and product integration 
Integrate your loyalty programs and promotions to provide relevant experiences for your most valuable customers.
MCX pitches CurrentC to vendors under the pretense that they will be able to customer transactions for information they can use to market products to those very customers.
Contrast this with Apple’s pitch to consumers for Apple Pay:
Keep your purchases private. 
Apple doesn’t save your transaction information. With Apple Pay, your payments are private. Apple Pay doesn’t store the details of your transactions so they can’t be tied back to you. Your most recent purchases are kept in Passbook for your convenience, but that’s as far as it goes.
For a more detailed thrashing of CurrentC, have a look at the tech crunch “CurrentC Is The Big Retailers’ Clunky Attempt To Kill Apple Pay And Credit Card Fees” article.

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