Apple may have forged partnerships with 22,000 retailers to start accepting payments through Apple Pay when the mobile payment system rolls out in October, but the iPhone maker has failed to court two major partners, including the largest retail store chain in America.
Wal-Mart said it will not support Apple Pay in its point-of-sale systems, preferring instead to provide support for CurrentC, another mobile payment system being developed by a network of retail store chains called Merchant Current Exchange (MCX).
"There will be a dominant player to come out of CurrentC versus ApplePay," says Michael Archer, a partner at retail consultancy Kurt Salmon Associates. "I'm not willing to handicap either one right now... you've got major players in CurrentC; you've got eight of the top banks and credit card issuers in Apple Pay."
Best Buy also said it will not upgrade its point-of-sale systems to new registers that can support near-field communications (NFC), the technology that powers Apple Pay's tap-and-go process. In 2011, Best Buy installed NFC-enabled systems into its stores, but disabled them shortly after due to the high cost of installing and maintaining them, which is largely brought about by the fact that NFC-enabled cards have not yet caught on in the U.S. Each of these systems cost somewhere near $350 and up.
Apple Pay comes at an opportune time for Apple because of the concerted effort by banks to push retailers and other merchants to upgrade their point-of-sale systems. The push is due to a new law that makes banks liable for card fraud and identity theft that may arise using the ages-old magnetic strip technology used for most credit and debit cards. The new point-of-sale systems are meant to support the chip-and-pin technology already commonplace in Europe and will also enable NFC payments such as Apple Pay.
However, Apple Pay is locked to the iOS ecosystem and only consumers who have newer iPhone models, including the iPhone 6, 6 Plus, 5, 5S and 5C, will be able to use this system. Instead of having all customers get the latest iPhone, the CurrentC app to which Wal-Mart, Best Buy and other merchants such as Target, 7-Eleven, Shell, Gap and Southwest Airlines have pledged their support is available for all platforms. CurrentC works by allowing users to load cash into the app and generating a QR code that can be recognized by older point-of-sale systems, reducing the need for consumers and merchants to upgrade their devices.
QR codes are not as secure but MCX hopes it can gain broader adoption by offering discounts and savings to buyers who use CurrentC. These discounts come from the fact that retailers no longer have to pay bank transaction fees every time they have to swipe a buyer's credit or debit card. Apple, on the other hand, will be receiving 15 cents for every $100 transaction made with Apple Pay, presumably because its combination of NFC and Touch ID biometric security makes it the most secure payment system against fraud. Customers will not have to pay additional fees to use Apple Pay; the 15-cent payment will come from the banks.
There should be no reason for merchants not to be able to use both mobile payment systems, though. For instance, Target, which is part of MCX, has also announced that it will accept Apple Pay payments by October.
"The interest level in the space is always going to be challenged if there are competing players," says Archer. "The opportunity, and maybe a need, for convergence is there."