photo by Afagen via Flickr
Despite the hype surrounding Apple’s new mobile payment system, not everyone is on board. Why are some major corporations and merchants alike rejecting Apple’s credit card killer?
According to Forbes, 220,000 stores and retailers around the country are already on board with Apple’s mobile payment system, in addition to the cooperation of major credit companies like American Express, Visa, and MasterCard.
Despite this fairly substantial adoption rate, some corporations like CVS, Rite Aid, Wal-Mart, and Best Buy, among other smaller merchants nationwide, have either rejected Apple Pay outright, or remain hesitant in signing on board.
But why are some of big business’ elite shutting the door on Apple’s new mobile payment system?
Apple Mobile Pay Keeps some Merchants At Bay
On the surface, it may seem strange that some big businesses are keeping a mobile payment system at arms length, especially given the involvement of institutional corporations like Apple–and even more surprising when considering the mobile payment market is projected to balloon to $90 billion by 2017.
In the case of CVS and Rite Aid, however, it may be less about Apple Pay in specific, and more about mobile payment systems as a whole–or more specifically, the competition between them.
Only a week after Apple Pay’s introduction, both CVS and Rite Aid shut down mobile payment capabilities in their stores.
CurrentC, unlike Apple Pay, cuts out credit card companies completely and allows users to make payments via checking accounts, gift cards, and some select debit and credit cards.
In specific, Rite Aid, CVS, Walmart, and Best Buy’s allegiance to CurrentC and subsequent rejection of Apple Pay, stems from the following:
- Interchange fees – though using plastic instead of paper currency is of no immediate cost to the consumer, the retailers must pay what is known as an interchange fee, which is essentially a processing fee charged by the credit company.
- Cutting interchange fee cost – this fee can range from 1 percent to 3 percent depending on the company. Since CurrentC cuts out credit cards completely, there are no interchange fees associated with its usage–this has been hypothesized to be a primary driver for some corporate allegiance to the CurrentC model.
- No data collection – Apple has vowed that no data collection will occur using Apple Pay–meaning no record of purchases or locations–nothing. Though a selling point for consumers, this has worked as a deterrent for some corporations intent on using this valuable data to propel their business models.
Turf wars over differing mobile payments systems, though a major factor in the involvement of larger corporations like the ones highlighted above, aren’t the only reason Apple Pay has seen some rejection. Some other aspects of Apple Pay which have hindered its adoption include:
Less than 10 percent of retailers have mobile payment capability
According to the New York Times, less than 10 percent of retailers are mobile payment ready as of 2014. Without the technology infrastructure in place, neither Apple nor rival mobile payment systems can reach critical mass.
Apple Pay is under-incentivized
Currently there is little to no incentive for adopting such technology. Between the cost of installing mobile payment systems and the additional training for employees, it may put a greater burden on the merchants–especially when considering the current system of swiping plastic isn’t necessarily overburdensome.
With 1 million credit cards being registered in the first 72 hours of its release, Apple Pay has undoubtedly been the most promising mobile payment system yet, far exceeding similar attempts by Google and Verizon.
The battle for mobile payment ubiquity, however, has seemingly just begun. If Apple intends on seizing the market, a few things to consider are:
- Making Apple Pay marketable to merchants
- Offering incentives to both users and retailers
- Helping retailers with installing mobile payment infrastructure
- Altering with their data collection stance