Battle in the Mobile Pay System- CVS and Rite Aid Say No to Apple Pay

The recent movements by retailers towards wireless payment systems, whether via ApplePay or new chip-readers (read CR’s recent story here) is expected to both boost security within the industry and make consumer interaction with the market more effortless. However, last week, Apple Pay experienced a bump in the road when CVS and Rite Aid rejected its system in exchange for the development of their own competing system. The companies currently have the technology needed to read short-range wireless signals, so they plan to develop their own system allowing consumers to pay bypassing credit card companies. Anindya Ghose, marketing and information-technology professor and New York University states,

This act by CVS and Rite Aid heralds the advent of the imminent battle in the mobile pay system.

Many agree the system has worked well so far, but there remain concerns of the control of data usage. As Richard Crone of Crone Consulting LLC explains,

The one who enrolls is the one who controls… We figure that is worth $300 per active wallet user per year. To put that in perspective, that’s twice the gross revenue that a bank makes on a checking account.”

CVS and Rite Aid are members of a retailer group called the Merchant Customer Exchange (MCX) which focuses on the development of mobile payment systems called CurrentC, expected to be rolled out in 2015. Other network members include Wal-Mart Stores Inc., Lowe’s Cos., and Target Corp.

Apple’s payment differs from that of the MCX in that the company has partnered with large banks and credit card companies.

As noted in a recent CR piece, credit-card issuers are currently forcing merchants to upgrade their payment systems within the next year to be able to read the short-wave signals. To do so is costly. Not only do the new chip-embedded cards cost more than traditional plastic cards, but to upgrade retail systems is estimated to cost $500-1000 per check out. The deadline for merchants to upgrade is October 2015.

 

Read more here- “Apple Pay Faced Challenge as CVS, Rite Aid Reject System,” (Tim Higgins and Zeke Faux, Bloomberg)

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Olivia is a graduate of Villanova University where she studied Economics and History, minoring in Gender and Women's Studies. She also has experience working with federal legislatures on health care policy, women's issues, and Internet safety.

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