The Early Ditchers of Apple Pay Have it All Wrong

I read the news that has lined the headlines about Apple Pay and shook my head as I consumed the information:

CVS Pulls the Plug on Apple Pay Only the latest to nix mobile payments

According to reports (and this made me laugh), Apple Pay uses an NFC chip, which isn’t compatible with CurrentC’s (the current mobile payment provider) QR codes. QR Codes? Really?

Here’s Walmart’s other response:

There are certainly a lot of compelling technologies being developed, which is great for the mobile-commerce industry as a whole. Ultimately, what matters is that consumers have a payment option that is widely accepted, secure, and developed with their best interests in mind. MCX member merchants already collectively serve a majority of Americans every day. MCX’s members believe merchants are in the best position to provide a mobile solution because of their deep insights into their customers’ shopping and buying experiences.

Interesting to note: Ryan Pannell, a close friend and hedge fund manager, pointed out that MCX is a company created by a consortium of retail companies.

The company is led by merchants such as 7-Eleven, Inc., Alon Brands, Best Buy Co., Inc., CVS/pharmacy, Darden Restaurants; HMSHost, Hy-Vee, Inc., Lowe’s, Michaels Stores, Inc., Publix Super Markets, Inc., Sears Holdings, Shell Oil Products US, Sunoco, Target Corporation and Walmart.

It’s a wonder why they would want to thwart Apple’s attempts in the mobile payment space:)

Besides an obvious bias, there are two other points that need addressing here: 1) the technology 2) the security

NFC adoption has been difficult

Yes, there has been some hesitancy about NFC, this ten-year-old technology. Up until a year ago, everyone thought that NFC (Near Field Communications) was dead. Remember this headline from TechCrunch from June, 2013?

Here’s some validation that NFC was essentially a wasted investment.

Near Field Communications’ evangelists have been trying to get smartphone owners to share stuff by bumping and grinding their phones for years. And progress has been painful, to put it mildly. The reality is NFC is an ugly wasteland of non-use. Ever seen anyone IRL tapping their phones together?

Cool concept right? Even better – if a simple tap of my smartphone at a retail terminal would seamlessly link to my payment information without my fumbling for it through my purse.

The reality is that the adoption of NFC has been an uphill battle. While the number of NFC-enabled smartphones had risen 300% to 140 MM units as of December, 2012, activation of NFC has been slow. Nearly all smartphone providers at this point, supported NFC and yet adoption has been slow. NFC POS terminals only number only 220,000.

Apple, for a large part, had been non-committal, favouring its iBeacon capability (which combines Blue-tooth and Wifi for short range wireless). Apple’s interest in prioritizing iBeacon over NFC was to augment the limited security of NFC.

According to Bijan Shahrokhi, CEO of Virtual Next,

We have also believed that Passbook would become significant in the mobile wallet arena…..Now by combining NFC with finger touch recognition technology TouchID, Apple is able to offer NFC payment in a secure manner inside PassBook, making PassBook more relevant than ever to restaurants and retailers.

Apple is enabling NFC adoption

Integration of Near-field Communications (NFC) into the iPhone 6 plus Passbook creates a much stronger value proposition for PassBook, not only for consumers, but also for merchants.

The announcement sends a clear signal to the marketplace. All iPhones will now have mobile payment capability. The credit card networks and the retailers are jumping on board. It’s pretty clear the PassBook capabilities may be enough to set Apple apart from the competition.

And now with with the recent announcement that Apple Pay activated 1 million users in the first 72 hours after Apple Pay launch, there is no denying the consumer wants this.

CurrentC Secure? Apparently not

Walmart’s response to thwarting Apple Pay was insane. The mobile payments industry is fragmented. Walmart deemed MCX, which uses CurrentC’s mobile solution: ” widely accepted, secure, and developed with their best interests in mind.”

The decision to stay with this solution is clearly short-sighted. How fortuitous that yesterday’s headline read:

MCX suffers email address data breach….

Within the last 36 hours, we learned that unauthorized third parties obtained the email addresses of some of our CurrentC pilot program participants and individuals who had expressed interest in the app.

Here’s the thing: ApplePay in partnership with some signficant players in the payments industry is the best option out there.

As Virtual Next points out:

• Merchants do not need their own apps to accept mobile payment. The PassBook is your digital wallet. Google is also following Apple’s direction with their Google Wallet app. So is Windows. We have understood the abundance of branded mobile apps and the low activation and usage rates that result.
• VISA recently announced its support for the iPhone 6 with their new Token Service, which essentially replaces credit card information with a digital account number. This eliminates the need for credit card information to be stored within the phone itself.
• You can only pay with your mobile phone if the phone recognizes with their TouchID technology that you are the owner of the card.

Combining NFC Technology with VISA Token Service and TouchID eliminates fraudulent activities and makes mobile payments much more secure.

The Road is long and there will be bumps along the way… but Apple Pay is Sustainable

To be fair, MCX has been successful in adopting a fairly significant merchant base. Established in 2012 and currently consists of 59 participating retailers, many large Tier 1 merchants. According to this

…. with 110,000 stores and process $1 trillion in annual payments representing more than 20% of the total US retail payments volume.

However the recent breach stands to question whether they are using a clearing house network to validate transactions. It’s evident that MCX does not support NFC. For retailers like BestBuy, most of the terminals, previously installed to support NFC, have been turned off because of the costs to maintain.

But MCX acknowledges it can pivot if need be ie if demand reveals itself.

This will not be an easy road for Apple. Getting into the payments game means having to deal with archaic legacy systems. In addition, the fact that Apple cannot produce simple receipts clearly indicates that there will be business and technical challenges they’ll have to tackle. Couple that with the increasing demand for more real-time offers and dynamic rewards programs.

Like all good things, this will take time. And the payments game is one worth paying attention.

photo credit: Janitors via photopin cc

Hessie Jones

Founder at ArCompany, and Director, International Council on Global Privacy and Security by Design Hessie is a  seasoned digital strategist, and intelligence analyst having held senior positions for top ad agencies including Ogilvy, Rapp Collins, ONE and Isobar Digital. She also has extensive start-up experience in AI technologies, social tech, online publishing and artificial intelligence like Yahoo! Answers, Overlay.TV, Jugnoo and Cerebri AI. Hessie is the co-author of EVOLVE: Marketing (as we know it) is Doomed! She is also  an active writer for Forbes, Cognitive World, Towards Data Science and Marketing Insider Group.