A number of high-profile retailers have rejected using Apple Pay in their stores, despite growing popularity of the new contactless payment service.
The tool, which went live on iPhone 6 models last week, will not be available in many major stores, including Walmart, Best Buy, CVS, Rite Aid, and others.
On Saturday, the pharmacies Rite Aid and CVS disabled Apple Pay from their stores, even though they have the compatible equipment that was working when Apple Pay launched last week.
They also blocked Google Wallet, a similar system for Android phones that Google launched in 2012.
Hurting retailers rather than helping them?
The key issue is that Apple is trying to persuade retailers to adopt a system that retailers have no incentive to adopt.
As Apple Pay gives no data to the merchant, Apple Pay actually hurts retailers financially. Like credit cards Visa and MasterCard, Apple will take a cut of the fee when the payment is made, meaning adopting Apple pay will further hurt Wal-Mart’s margins.
Neither Rite Aid nor CVS will specifically say why it decided to disable Apple Pay, but it seems to be because each is part of the Merchant Customer Exchange, a consortium of the biggest retailers in the US. MCX happens to be working on its own mobile payments app, CurrentC, which is in beta testing and is expected to launch next year.
Other MCX members include Walmart, Best Buy, Gap, and others, which means these stores will also lack Apple Pay support, even though they are very interested in contactless payments technology.
MCX’s smartphone payments product is called CurrentC and is set to launch at some point in 2015.
Unlike Apple Pay, CurrentC will not use credit cards. Instead, the app will connect directly to a customer’s bit account. When a purchase is made, the merchant must scan a QR code on the smartphone to initiate a payment. The credit card companies are thus left out of the entire payment process.
Furthermore, CurrentC will also collect data about a buyer’s shopping habits across the stores part of the MCX network — also something entirely different from what Apple does with Apple Pay — in order to better target customers with special deals and loyalty programs.
A drop in the ocean for Apple?
In response, Apple chief executive Tim Cook has hit out at US retailers for having dropped Apple Pay, hinting that it will be a drop in the ocean when the app is released worldwide – especially with Alibaba executive chairman Jack Ma seeking a “marriage” between the firms.
Speaking during the Wall Street Journal Digital Live event on Monday, Tim Cook called Apple Pay’s US retail set-back “a skirmish”, adding that the app is already the leader in contactless payments.
Referencing pharmaceutical retailers RiteAid and CVS disabling NFC payments earlier this week, Cook said: “We’ve got a lot more merchants to sign up, we’ve got a lot more banks to sign up and we’ve got the rest of the world.
“Merchants have different objectives sometimes but in the long arc of time, you only are relevant as a retailer or merchant if your customers love you.”
During the event, Alibaba chief executive Jack Ma, who is in the US to cement media partnerships for the westward moving Chinese e-commerce giant, said that he hoped Apple and Alibaba could form a “marriage” when asked if the firms could work together on Apple Pay.
Alibaba, which moves more goods than eBay and Amazon combined, has Alipay, a payment service similar to PayPal with 300 million users.
Although it is largely unknown in the west, Alipay is the third biggest payment service in the world, behind only Visa and Mastercard. It would grow substantially on the back of any partnership with the week-old Apple Pay.
Jack Ma will continue his tour of the US in search of commerce partners. He will have considerable capital to invest after it emerged earlier this month thathe is China’s richest man with a $25bn fortune.