Apple Pay and its war with CurrentC
Apple Pay is a new mobile payment system developed by Apple that lets users make on-the-go payments with their Apple devices. Initially released in late October, this new segment created by the company stands to disrupt the payment processing market much like it did with the mobile phone sector in 2006. Apple Pay uses a near field communication (NFC) antenna to communicate with point of sale (POS) systems present at the checkout counters of over 220,000 retailers, making transactions simpler by eliminating the use of wallets, credit cards and PIN pads. iPhone 6 and 6 Plus users rejoiced, and reviews for Apple Pay have been overwhelmingly positive.
However, on October 25th, CVS and Rite-Aid, two massive retailers that process millions of transactions a day, unexpectedly stopped accepting Apply Pay. After further news, it seemed that both stopped offering competing pay systems as well, including Google Wallet and Softcard. Best Buy soon followed, rejecting Apple Pay at their already NFC- enabled POS systems.
The real reason why these retailers are not so quick to join Apple has become evident in recent days. Retailers are sick and tired of paying companies like Visa and MasterCard fees for customers who use credit and debit cards at their retail locations. Fees range anywhere between 2 to 4 percent of the total transaction cost. They also do not want to share valuable transaction with Apple, who is a growing competitor to everyone these days.
Rite Aid, CVS and Best Buy have joined the likes of Wal-Mart and over fifty other retailers in creating their own payment system called CurrentC. The consortium of retailers are collective known of Merchant Customer Exchange (MCX) with the main goal of increasing their bottom lines by reducing transaction fees. If successful, CurrentC would put these retailers in complete control of each transaction, as well as valuable information and spending patterns of its users.
CurrentC isn’t expected to be fully launched until sometime in 2015, but the mobile payment system has already been hacked. The current pay system uses an antiquated QR code method and links directly with your checking account, which many critics do not find secure. On the other hand, Apple Pay goes has multiple security levels, which will make it much more difficult to hack. This does not mean that CurrentC will not change its approach however.
We at iBeacon believe that Apple Pay will ultimately be successful in the long run. Apple has a large user base of loyal customers who thoroughly enjoy Apple and its products. As more phones are sold with Apple Pay integration, so does the demand for the service. The pent up demand for Apple Pay will be hard for retailers who opted out to ignore.