Apple Pay is now in play. And so the consumer chapter begins in a saga that will potentially make all the difference for retailers on either side of the mobile-wallet debate.
“What retailers prefer vs. what customers prefer will be a big issue,” says Scott Hartman, president and CEO of Rutter’s Farm Stores, York, Pa. “Ultimately, our customers will choose how they want to interact and pay us for services—and there will certainly be winners and losers all over the field.”
Early reports show it took only three days for Cupertino, Calif.-based Apple to sign up more than 1 million users—a task that reportedly took Google just over a year to do after it launched its wallet in 2011. Though Mountain View, Calif.-based Google has had millions more sign on since then (although signups aren’t a clear indicator of consumer use), Apple Pay’s quick start bodes well for a surge in new transactions.
But its launch was polarizing from the start. CVS, Rite Aid, Walmart, Best Buy and 7-Eleven reportedly chose not to take Apple Pay—and for that matter Google, Softcard and the near-field communications (NFC) technologies they have in common—in favor of their own soon-to-market solution, presumably Needham, Mass.-based Merchant Customer Exchange (MCX) and its CurrentC wallet set to launch this year.
Taunts such as “You’re only relevant if your customers love you” have been met with comebacks such as, “The credit- and debit-card system in the United States stopped innovating … due to the market dominance of Visa and MasterCard.”
At once a call to arms and prayer after a Hail Mary pass, the core of the debate for retailers seemed less about technology than the ongoing dog fight over interchange fees. At least that’s NACS’ take.
In a press release, officials with the Alexandria, Va.-based c-store association said, “[Visa and MasterCard] have faced a lengthy series of antitrust actions from the U.S. Department of Justice and merchants over the years due to their anticompetitive conduct. Now they are working feverishly to require merchants to accept their preferred technology, NFC, so that they can extend their dominance into the future.”
Whether true or not, the debate has retailers’ cogs churning, with many calmly plotting out the pros and cons. For Jenny Bullard, CIO of Waycross, Ga.-based Flash Foods, it’s an issue of numbers, everything from current customer base to the impending cost of equipment.
Apple Pay, from Bullard’s perspective, offers only a small percentage of customers a new way to pay. That number is too small to justify the cost of upgrading dispensers to accept NFC. She says they can take NFC inside the store today because most of their PIN-pads have NFC capability.
“But … a consumer will certainly say, ‘If I can pay inside with [this] payment technology, then I want to pay at the pump with that same payment method.’ ”
The industry is already burdened financially with Visa and MasterCard deadlines for compliance with EMV standards, a new chip-card security method. It’s hard to justify accommodating Apple Pay now when in two years, retailers will be faced with the cost of changing out older-generation pumps that can’t be retrofitted with EMV.
Bullard goes on to say that with Apple Pay, a retailer sees no savings on credit-card interchange fees. Although she has heard the credit-card companies won’t charge retailers for Apple Pay transactions, she’s skeptical.
“Card providers find a way to pass all additional costs on to the merchants,” Bullard says. “So with no savings on interchange, that leaves no avenue to pass … savings on to our consumers,” which is what happens with her Flash Foods loyalty program.
Bullard also brings up differentiation. If, as Apple desires, all merchants accept it, what differentiates Flash Foods from other c-stores or retailers in other channels?
CONTINUED: The CurrentC Side
Having made a case against Apple Pay, Bullard then cites the benefits and drawbacks on the CurrentC side. A big plus for MCX is merchants having access to their customer information and buying habits, which Apple Pay does not provide, Bullard says. The wallet, brought about by a consortium of retailers, also allows merchants to offer consumers savings for shopping at their sites.
However, MCX “is taking too long to develop and introduce CurrentC to consumers,” she says.
Bullard also brings up the initial cost of being a member of MCX, not only significant funds but also dedicated resources to help design and develop the end product.
But she’s in total agreement with NACS about the incentive to join MCX: “The big [reason] for becoming a member of MCX was to introduce an alternate payment for consumers that would impact the credit-card issuers and bring about a solution to reducing interchange fees.”
In the end, though, MCX merchants have to do a lot to “even make Visa suffer slightly.”
Despite Bullard’s level-headed evaluation, c-store retailers stand decidedly on both sides of the debate. MCX c-store merchants include 76, 7-Eleven, Alon Brands, Circle K, Conoco, ExxonMobil, GetGo, Kum & Go, My Goods Market, Phillips 66, QuikTrip, RaceTrac, Sheetz, Shell and Sunoco.
But Chevron and Texaco will accept Apple Pay, and regional retailer Framingham, Mass.-based Cumberland Farms will too.
“Our ‘first-mover’ position on mobile pay at the pump sets us up to continue to innovate on platforms like Apple Pay,” says Dave Banks, CIO of Cumberland Farms. “We are working with our partners now to leverage [our own] SmartPay platform and make Apple Pay available at the pump soon.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.