Drugstore Chains CVS, Rite Aid Disable Apple Pay As In-Store Payment Method

Chuck Bednar for redOrbit.com – Your Universe Online
Apple’s plans to change the way that people pay for items at brick-and-mortar locations appears to have hit a bump in the road, as two prominent US drugstore chains have reversed policy and are no longer accepting Apple Pay.
The two companies in question, Pennsylvania-based Rite Aid and CVS Pharmacy of Rhode Island, are among the over 200,000 merchants that already have equipment capable of reading the wireless signals which allow customers to use iOS devices to make wireless payments, Bloomberg reporters Tim Higgins and Zeke Faux said on Monday.
Neither company was among those specifically listed as retailers accepting Apple Pay when the system was first announced last month, but both were reportedly accepting it as of last week. Rite Aid stopped accepting payments through the near field communication (NFC) service on Thursday, according to Paul Ausick of 24/7 Wall St., and CVS Health followed suit on Saturday. Neither firm responded to Bloomberg’s request for comment.
Reuters reports that the reason both chains disabled Apple Pay was not immediately known, but an anonymous source told Higgins and Faux that both CVS and Rite Aid are part of a consortium developing a competing payment system. Reuters, the New York Times and other media outlets have reported similar information.
“The issue appears to be a conflict between Apple Pay and a mobile payment system called CurrentC that is being developed by a retailer-owned mobile technology outfit called Merchant Customer Exchange (MCX),” said Ausick. “Unlike Apple Pay, CurrentC does not use an NFC chip, but instead generates a QR code that is displayed on the merchant’s checkout terminal. Customers who have already linked their bank accounts to the CurrentC system scan the QR code from the terminal and the transaction is completed.”
“Clearly Rite Aid and CVS are making a business decision over a customer satisfaction decision,” Patrick Moorhead, president of Moor Insights & Strategy, told Mike Isaac of the New York Times. Moorhead added that the move could upset customers who viewed Apple Pay as an easier-to-use, safer alternative to traditional credit or debit cards.
Apple has declined to comment on the issue, Isaac said, but it is worth noting that CVS and Rite Aid are far from the only merchants resisting Apple’s new digital wallet and wireless payment service. As Ausick noted, when it was first announced in September, both Wal-Mart and Best Buy said that they had no plans to adopt the system. Both companies are partners in MCX, as are Target, Sears Holdings (which includes Kmart) and Darden Restaurants.
MCX has been developing its mobile payment solution since 2011, he added, and the goal is to find a way for merchants to avoid paying the two- to three-percent fees charges by Visa and MasterCard for credit card transactions. Ausick said that CurrentC will likely be used exclusively by these merchants during the short term, since they have a direct investment in the service, but suggested that customer demand could ultimately force their hand.
“If, as most observers expect, customer demand for NFC-based systems like Apple Pay grows rapidly, these retailers are not going to adopt a ‘my way or the highway’ attitude with their customers,” he explained. “They have learned that when it comes to technology, it’s a consumer-driven world and they just live in it. And one other thing retailers have – or should have learned – is not to underestimate the power of Apple in the consumer world.”
“MCX naysayers say that CurrentC is more difficult to use than Apple Pay, which does not require customers to unlock their phones or open an app. And they say it is far more complicated than paying with cash or a credit card,” Isaac added. “MCX has time, however, to alter its strategy before releasing its product. And since MCX merchants are all working together, CurrentC could offer consumers enticing deals and loyalty rewards for shopping at any one of the dozens of participating stores.”
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