Retailers push system to rival Apple Pay and other mobile wallets
Q&A explores what the industry fight means for contactless payments
By Fred O. Williams | Published: October 28, 2014
Waving your smartphone to pay for things at the cash register will get harder before it gets easier, as some big retailers shun Apple Pay in favor of their own app.
Last week, CVS and Rite Aid shut off their wireless checkout technology that supports Apple Pay, Google Wallet, and some other pay-by-smartphone systems. The move beamed a spotlight on a battle between banks and retailers over who will control smartphone payments at the register.
In September, the same month that Apple Pay made its debut, a group of big retailers announced the development of their own smartphone payment app, called CurrentC.
CVS and Rite Aid -- as well as Wal-Mart, Target and other big chains -- are part of the group, called Merchant Customer Exchange (MCX), which says CurrentC will be available nationally in 2015.
For now, the spat has little impact on consumers, since few people are using smartphone payments at checkout lines anyway.
Wal-Mart never supported the Apple Pay technology at its registers and has no plans to start, spokesman Randy Hargrove said. CVS is "in the process of evaluating mobile payment options for our customers," CVS Public Relations Director Mike DeAngelis said in an email response to questions.
But the battle could slow the spread of smartphone checkout technology if retailers split into two camps that back rival systems, an analyst said. The opposing systems work differently and have different benefits for consumers.
"It's not an apples-to-apples comparison -- no pun intended," said Philip Philliou, a partner in the payments consultant Philliou partners.
Here in question-and-answer format is a look at how CurrentC differs from other systems, and what the split means to consumers.
Q: How does CurrentC
The app, not yet generally available, uses on-screen QR codes and scanning technology to complete a transaction. Users provide their checking account information when they set up the app. When they make a purchase they type a PIN, and the app generates a one-time authorization code for the sales clerk to scan. The code connects with cloud-stored bank account data, and the system pulls the amount of the purchase from the user's bank account.
Q: What is the major
difference compared to Apple Pay?
Instead of QR codes, Apple Pay uses short-range radio signals called "near-field communications," or NFC, to let your phone talk to the retailer's system. When you authorize a purchase, rather than entering a PIN, you use your fingerprint, thanks to the iPhone's built-in Touch ID button. Also, Apple Pay uses your existing credit card or debit card network to complete the payment, instead of tapping into your checking account.
Q: What are the
Both apps are free, but the benefits are different. CurrentC says it connects with your prepaid cards and affinity programs at merchants, streamlining benefits and discounts from those programs. But since CurrentC cannot be used with credit cards, purchases made with the app don't count toward credit card rewards.
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Q: What about
Both systems are designed to prevent data breaches of the sort that hit Target and Home Depot. Retailers won't handle your actual account information. The use of one-time codes to complete transactions should safeguard account numbers from hackers. As for card security, the split over smartphone payments doesn't affect the rollout of new chip-based security technology on physical debit and credit cards.
Q: What is my
liability for fraudulent transactions?
Banks have confirmed that they will back Apple Pay transactions with the same fraud protection they offer on other payment networks. Visa, MasterCard and American Express networks have signed on as partners with Apple Pay.
MCX representatives were unavailable Monday to discuss what liability users of CurrentC would face. Analysts say the retailers' network is similar to banks' debit networks, and will fall under the Electronic Funds Transfer Act, which limits liability on a sliding scale, depending on how quickly you flag unauthorized charges. If you notify the issuer within two days of the loss of an access device, for example, your liability is capped at $50.
Q: Why are the MCX
retailers doing this?
Retailers will pay less for transactions completed over CurrentC than over bank payment networks that Apple Pay uses. They will also keep data about where people shop and what they buy. Stores are worried that payment apps could undermine them by selling that shopping data to their competitors. Apple Pay has pledged not to keep or share consumers' shopping data, but other mobile wallets, such as Google Wallet, have made no such pledge.
Q: Who will decide
which technology wins?
Consumers will eventually have a say in the battle, especially if their shopping dollars back up their preference, analysts said. If retailers lose out on sales because they lack a popular payment system, they will be forced to reconsider their choice.
On Monday, fans of Apple mounted an Internet campaign against CurrentC, urging people to boycott it and give it unfavorable online reviews. By the end of the business day, users of the Google Play app store gave CurrentC 1,688 one-star reviews, 18 five-star reviews and six reviews in between.
However, more and bigger retailers back CurrentC than Apple Pay, although CurrentC is not yet available except by invitation. Fifty-eight retailers appear on CurrentC's website as backers, including Wal-Mart, Target and Best Buy. Apple Pay lists 34 retail partners including Macy's, Walgreens and Petco.
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