Mobile payment misstep: CVS and RiteAid disable NFC, Apple Pay, Google Wallet

35 Comments

Credit: Tom Krazit/Gigaom

Just as mobile payments in the U.S. are gaining more momentum, some retailers are still jockeying for position with their own ideas.

Take, for instance, CVS and RiteAid: According to MacRumors, both companies shut down the NFC payment terminals they already had installed in their stores that accept contactless credit cards, Apple Pay and Google Wallet.

Apple CEO Tim Cook introduces Apple Pay.  (Photo by Justin Sullivan/Getty Images)

Apple CEO Tim Cook introduces Apple Pay. (Photo by Justin Sullivan/Getty Images)

Why did they do this? Because they, along with others, have an alternative mobile wallet system in the works, of course.

That wallet system reportedly works with QR codes in an app called CurrenC, with the customer having to scan one while the cashier has to scan another. My understanding is that CurrenC is linked directly to a bank account, not a credit card, and if that’s correct, it’s going to be a non-starter for many.

For a mobile payment system to be appealing — and therefore build up a large user base — it needs to either be simpler than worrying if you have your physical credit card or cash with you, or it needs to add some other value. Opening a specific app and then scanning QR codes with a camera isn’t easier than either [company]Apple[/company] Pay or [company]Google[/company] Wallet, in my experience. I don’t see any benefit to the customer here, nor as much speed in the transaction.

Even worse, by shutting down NFC terminals just to oppose the newer Apple Pay and Google Wallet systems disables the older contactless cards. I’ve been using one for nearly a decade: My AMEX card has a small RFID chip that I simply tap to the terminal. Sure I can still swipe the card but we use the card so much — we charge nearly everything to maximize the cash rewards program benefit — that the stripe often goes “bad” long before the card expires.

Amex11

My hope is that [company]CVS[/company] and [company]RiteAid[/company] rethink their policy and re-enable the NFC terminals. If for no other reason, they already paid for those terminals and the NFC capabilities. Why not let them be used by customers who want to use them to pay for something with a credit card the two retailers still accept with a swipe?

35 Comments

Julian

This is all Apple’s fault. I’ve been using Google wallet at CVS for years now then last time I tried: susprise! it was disabled.

whitewashfanboy

What most of the commenters forget is that many people do not have credit cards and only have debit cards. Apple pays is not set up to include debit cards and is therefore worthless to a number of consumers. The ConnectC system is designed to work for customers who only have to use it like they already use their debit cards.

This is not a defense of MCX’s system but simply a fact that is being ignored by those who apparently have no retail experience. I do have decades of experience and debit cards are the top way that people use to pay, even for expensive purchases. With Apple leaving those users with no options, MCX actually has a chance at a greater adoption rate than it has been given.

Dan

You are wrong. All debit cards now are issued as visa or mc. I have used my debit Wells a cargo visa with apple pay a few times already. As long as a store takes visa I can use my debit card and run it as a credit. Still comes out of my bank account.

Guy Fuller

I have no loyalty towards any institution, I go wherever it’s most convenient and reasonably priced. CVS and Rite Aid should adopt a strategy to bring as many folks into their brick and mortars as possible, but instead they shortsightedly decide to force the patrons to lug plastic into the store – to counter this move, I will go elsewhere.

I want options galore.

Craig Statchuk

Such a great opportunity is about to be squandered.

The US is pretty much the only 1st world country left without NFC and chip readers. Credit card companies know this. They have demanded US retailers move to more advanced technologies by next year or face having them pay for fraudulent card use. Rather than promote a standard for everyone to use, card issuers are stepping back and letting retailers fend for themselves. The result will be a fragmentation of services that will frustrate card users and delay improvements for a very long time.

Going further and leapfrogging to a single NFC standard would put US retailers out in front for years to come. By fragmenting services the only real winners will be: A few startups who will get money as they implement half-baked systems that will ultimately fail when retailers finally see the value adopting a single standard. These is one time when the free market forces will cause expensive delays that we will all pay for with our wallets and with time wasted.

rnickell

I want to go in there and load up a whole cart full of stuff, then when they say we dont accept apple pay, just walk out leaving the cart there full.

rebannford

I will make my purchases at businesses that accept Apple Pay. If a retailer is not going to allow payments with Apple Pay, they will lose my business.

Sly Stallone

That’s a dumb approach, the store that should get your business is the one that offers the best price for the things you need. Period! I’m not going to stop shopping at a lower priced store just because they don’t take nfc payment.

Ivan Kautter

So when Apple enters the mobile payments business with its own proprietary solution, suddenly mobile payments are gaining momentum?

And of course retailers should in no way be permitted to control their own business nor advance their own system nor make the transaction fees that Apple will get.

Gosh, those guys are sure jerks for standing in Apple’s way to make more money.

Also interesting to note that you left Walmart and Bestbuy out of this story. And here is a list of CurrentC’s partners via The Verge: Gap, Old Navy, 7-Eleven, Kohls, Lowes, Dunkin’ Donuts, Sam’s Club, Sears, Kmart, Bed, Bath & Beyond, Banana Republic, Stop & Shop, and Wendy’s and almost all major gasstation china

sam

but the entire point of NFC is precisely that it’s *not* an apple proprietary system. It’s the same system used by Google Wallet (Android) as well as FastPass and other systems that have been in place for several years. The whole reason it worked for a week at places like CVS and Rite Aid was that they didn’t need “special” hardware to read the systems, because they already had the NFC readers in their stores as part of terminal upgrades that had been put in places some time ago. Apple was piggybacking on already existing technology.

The entire point of CurrentC is that retailers don’t want to pay credit card companies (not Apple) the fees that they’ve been paying for 40 years. They want direct access to your bank account to bypass credit cards altogether. That’s great for them, but I’m not sure how giving stores direct access to my bank account (something I’ve personally refused to ever do with plastic cards, much less with the advent of digital payments), without the layer of fraud protection that my credit card provides, is actually beneficial to me as a consumer. I’m not necessarily going to boycott every store on that list, but I’m certainly never going to use a system that wants direct access to my checking account like CurrentC.

sam

There is a reason I try to never use my debit card for purchases, and never authorize any vendor (including utilities and the like) to withdraw funds from my bank account. I only ever use a credit card (or cash) and simply pay the full balance every month. If I want to pay bills online, I pay them *from* my bank account rather than ever authorizing withdrawals at other sites.

Credit cards offer consumers a level of protection leaps and bounds above debit cards or bank account access. Aside from the generally better fraud protection overall, if someone were to rack up a bunch of charges on my Amex, that is money that is coming out of AMEX’s and the merchant’s pocket while the charges are being disputed, and not mine. If my debit card were to get hacked, the money is gone from my account unless and until my bank decides to restore the funds, which can take months.

mfocazio

Forget all of the other arguments, this is the essential truth of the failing of CurrenC and any other “pull” payment schemes. Pushing money from your account to another via an authenticated transaction you initiate is Good. Allowing any entity to PULL from a back account at their discretion is BAD.

Debit cards, in general, are a very bad payment option unless you literally transfer in only as much money as you need for the next transaction yourself via your banking app.

As far as the personal data and history, well, that’s what a rewards club card is for. Make those work better than they do now and the purchase history will flow, regardless of payment method.

Amerist

CVS shoots itself in the foot. They will not get my business after this stunt.

J Edwards

I tried to use the GW at CVS last night and found it did not work despite being able to do so prior to that.
The reason for using competing payment system is they want to cut out the middleman and be able to track customer preference.

One of the things I found in my research about CurrentC, as the article stated, it uses the bar code to finalize transactions using the bank account. Since the bar code or QR is so 2011 that most won’t go along with it and it is not secure. Another thing is that many of the merchants on board are required to maintain the system for three years. Considering the fact the app is not out even before switching off the NFC is killing the goose which will make adoption of the NFC payment system even longer.

poidev

It’s funny because such a backlash can fire back on MCX and CurrentC.

I understand allowing (most of) the apps of competing services in the App Store / Google Play Store to exists. But when companies take such blocking moves, all Apple and Google have to do is block the CurrentC app from their app stores. That will pretty much stop CurrentC in their tracks.

mike

Welcome to Google’s world, Apple. This is essentially the same thing that befell Google Wallet at first. Only then it was the carriers blocking implementation with dreamy eyes of their own competing service.
The interesting thing will be to see if the oft lauded market force of Apple will be enough to sway these stores on this policy. I’m not sure it will be. While some people might switch I think most pick their drugstore on different criteria and would continue to do so.
Of course even a small movement in customers might sway them. Especially if other large drugstores start advertising vigorously that they do accept NFC payment.

Sam

The problem with Google Wallet, is that it only benefited Google, not the Android OEMs. Samsung, HTC, LG, etc had no incentive to pick a fight with the carriers and already had shaky partnerships, for Android OEMs not named Samsung.

The carriers can dictate which brands and models of smartphones to sell. The smaller Android OEMs are not going to cross the big 4 in the US.

dornim

Not only does that mag stripe wear out it is NOT secure compared to CHIP and PIN
I do not even trust the TAP and GO.
I insert the card and enter pin (covered by my other hand).
Quick and easy? I prefer SECURE… It only takes one more input.
Of course CHIP and PIN is still virtually unknown in the USA

J Edwards

I use the tap and go because it uses a virtual card not the real one to process the transaction. The merchant does not have access to it thereby avoiding the data breach in the process.

Lore

Creating a payment system that links directly to a bank account and cut out the middleman (VISA, Mastercard, etc.) to avoid extra fees is the right decision. However the execution is lame (QR code) and the implementation way too slow.

Joseph Yokubaitis

That middleman also protects from fraud and offers a raft of rewards. Not to mention, you know, CREDIT for things you want to buy and pay off in parts. Enjoy that (lol) “security” that you get from Dunkin Donuts.

chrisw52

Well, here we go again. The battle of the standards begins again. It seems that every time we get something that will benefit the consumer, someone else (late to the game) says otherwise. Not because it’s a better technology, but more often than not, it is because they want to control the standard.

Reblogged on conedogers.com

Rann Xeroxx

You mean like Apple using proprietary ports and plugs and proprietary everything? Nothing new here, and Apple is just as guilty. Google still refuses to release Google apps for Windows Phone, etc. All these companies are out for themselves, Apple is not knight on a white horse.

chrisw52

agreed, but the NFC standards are well on their way. All apple did was use their own marketing “ApplePay” instead of “Google Wallet”… Both technologies use the same NFC payment chip. CVS’s move makes no business sense because NFC payment systems are already adopted overseas, there is little need for a competing payment system

sam

I could *almost* understand them doing this if they had their competing system ready to go, but to disable an existing functionality that has been used for several years by some consumers because it now may gain actual critical mass/popularity, in favor of vaporware that may get introduced at some point in the future is just…nonsensical.

I’ve never been so happy at the ubiquity of Duane Reade (now a subsidiary of Walgreens) here in NYC. I may or may not end up using ApplePay, but it should be consumer choice that drives these decisions. It’s the same reason I tend to shop less at stores that don’t take American Express.

eldernorm

Corporate Greed knows no bounds. And even if profit suffers, as long as they get their bonus, that is all that matters. Sadly.

Rann Xeroxx

Are you talking about the drug stores or Apple, its hard to say from your post.

Christopher S.

It actually is “consumer choice” it’s your choice to shop there or not with this new system.

Jeff

I’ve heard it it’s more about retaining customer data for themselves. Apple pay completely anonymizes the transaction. Either way it’s stupid and shot sighted and hurts the customer.

D

Could the threat of losing access to tracking shoppers be a concern from CVS and Riteaid? Not sure if Apple Pay challenges a retailers ability to track customers or not, but to anyone who has closely studied privacy concerns, big drugstores are notorious for efforts to track customers’ purchases in detail. Ever feel like those loyalty programs are being pushed just a little hard? Even excluding HIPAA covered info, your other drugstore purchases reveal quite a bit of valuable and revealing data and all that is required to identify you is the name from your credit card and your zip code–no loyalty program or even phone number required.

Outside of states like CA that outlawed requiring customers to give a zip code when it’s only real purpose for collection was to link a purchase to a customer’s data record, many drugstores around the country still require you to provide your zip at the register. It seems a proprietary payment program owned by drugstores and other retailers would provide even deeper customer data troves while Apple Pay may present a serious risk of losing access to this data.

This is a speculative question since I don’t know for certain if or how Apple Pay might make unwanted (from a customer perspective) data collection more difficult for a retailer, but it seems plausible and I think it is one worth asking.

http://articles.latimes.com/2011/feb/11/business/la-fi-0211-privacy-20110211

Quote: Reporting from San Francisco — In a case watched closely by merchants, the state Supreme Court ruled unanimously that California retailers may no longer collect ZIP Codes from credit card customers, except in limited cases.
….

Quote: Eli Portnoy, a retail and marketing expert, said businesses will just be more creative in how they gather information on consumers in the future. He noted that there has been “a gathering storm, a backlash,” from consumers tired of having to reveal personal information.

flexyourheadx

Looks like CVS/Rite Aid and the rather impressive list of other retailers who’ve signed up for CurrenC are trying to sidestep the transaction fees the credit card companies charge, let alone Apple’s cut for each Apple Pay transaction. Maybe a win for them, not for the consumer.

Fank

The banks pay the fee to apple. It is completely free for these stores to accept NFC.

Larry

Yeah right, you do know what the store will do then? Yep increase the price. Apple Pay’s fee suck.

Misternice Guy

lols you cant fight mommy(apple) and daddy(google) together they could conqer the world lmao;)

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