Monday, October 27, 2014

CVS, Rite-Aid, WalMart and others are all on crack

USA Today: CVS follows Rite-Aid, shuts off Apple Pay

Last Thursday drug store chain Rite Aid Inc. (RAD) reportedly stopped accepting payments made through the just launched Apple Pay system from Apple (AAPL). On Saturday, CVS Health (CVS) was reported to have followed suit at its CVS pharmacy stores.

The issue appears to be a conflict between Apple Pay and a mobile payment system called CurrentC that is being developed by a retailer-owned mobile technology outfit called Merchant Customer Exchange (MCX).

I'm sure you've heard about the above news already. For more information on this, TechCrunch wrote a great article all about CurrentC, how it works and why it even exists.

As far as I (and TechCrunch) can tell, CurrentC's purpose is to let retailers avoid paying merchant fees to credit card companies. Customer experience is irrelevant and not even considered.

In order to use CurrentC, you need to first wait for several months because the system doesn't exist yet and won't be rolled out until some unspecified time in 2015. Then you must install their app, and register it to your bank account (not a credit card.)

In order to pay, you need to launch the app, scan a QR code at the register, wait for CurrentC to process the transaction, and then let the cashier scan a confirmation QR code displayed on your phone's screen.

The system is highly insecure, because anybody standing near you with a phone can scan that code from over your shoulder. The app has access to all data in your phone (including health monitoring data - don't ask me why it wants that.) The transaction uses your phone's internet data connection (so no transactions if you have a bad signal or have exceeded your month's data allowance.) And if anything goes wrong, the money has been taken from your bank account, so none of the consumer protection laws related to credit cards will be applicable.

In other words, all these retailers, in an insane effort to hurt Visa, expect you, their alleged customers to make your purchases using a system that:

  • Doesn't exist yet (will start being rolled out next year)
  • Is less convenient than using a plastic credit card
  • Is less secure than a plastic credit card
  • Has fewer consumer protections than a plastic credit card
  • Is slower than a plastic credit card
  • Requires you to have an active internet data connection
  • Forces you to give a payment processor direct access to your bank account

Are you that crazy? Would you ever consider using such a system? Ever? How much money would they have to pay you to get you to even try it out once? I can tell you that they couldn't afford my price.

Now, let's put this in the context of the above USA Today article. These merchants don't like the fact that Apple Pay is better. It is more convenient than plastic, is more secure than plastic, retains all credit card consumer protections, and is very fast. They don't like it because they weren't involved in developing it, and that the transactions still involve the credit card system.

They think you, the consumer, are going to choose their stupid brain-dead system (which, let's remember, doesn't exist yet) over ApplePay simply because they wish it. They think that if they don't allow ApplePay on their cash registers, you'll go use CurrentC because they think you'll have no choice (except, of course, using the same plastic credit card you're already using.)

In other words, they're on crack.

I wonder if, when CurrentC finally rolls out, and nobody uses it, if they'll stop accepting credit cards as well. Sounds crazy? It's just as logical as what they're doing today. They may well be dumb enough to drive themselves completely out of business rather than admit they spent insane amounts of money on a steaming pile of excrement.

P.S.: I wrote the above before I read John Gruber's Daring Fireball article which makes the same point in a different way.

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