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Why Some Stores Won’t Take Apple Pay, and How to Punish Them

Rob Pegoraro
Contributing Editor
Yahoo Tech
Card reader reading 'Unable to complete transaction'

(Rob Pegoraro/Yahoo Tech)

If you want to use Apple Pay or Google Wallet at a Rite Aid or CVS drugstore, sorry, your money’s no good there.

Instead, you’re in for an experience like the one I had Monday at a CVS. When it was time to pay, I opened my phone to the Google Wallet app and tapped it against the near-field communication reader. The phone beeped and buzzed as usual.

But the checkout screen told me to use another form of payment.

O say can you CurrentC
This holdup was not due to an incompatibility between the checkout terminal and my phone. Instead, it reflected a policy change that iOS developer Josh Hudnall saw happen overnight: Last Wednesday, he could use Apple Pay at a Rite Aid in Colorado. Last Thursday, he could not.

Rite Aid, CVS, and other members of the Merchant Customer Exchange (MCX) — from Banana Republic to Best Buy, Sears to Southwest Airlines — would rather we all use a mobile-payment app called CurrentC.

With this alternative mobile payment system, stores in the exchange get a few things: For one, there are potentially more customers using the system, since it’s open and works even on smartphones without NFC chips. Second, these retailers can merge frequent-customer deals into the payment process. Third, they can route their transactions around either credit card transaction fees or Apple’s fees.

How’s it supposed to work? You’d open the app, have it display a “QR code” and hold that up to a scanner in the store to identify yourself and to pay.

Beyond Apple Pay
CurrentC does provide unique benefits. The integration of frequent-customer deals and coupons at checkout might save people money. But relying on QR codes is a problem.

In my experience, I always have to be prepared for the black-and-white code on my phone’s screen to require a second or third scan when it’s time to check out. I can deal with that for interactions that happen only once or twice in a week, but not for everyday transactions.

CurrentC also must siphon money out of your checking account or store-issued credit or debit card, not your usual Visa, MasterCard, American Express, or Discover. And users who have tried this app — it’s available only via invite pending a broader debut next year — have complained that signing up requires providing a Social Security number and a driver’s license and accepting it collecting a disturbing level of data.

(MCX and its PR firm didn’t reply to two emails and a voicemail left Monday.)

So who is this system for? The merchants, who don’t have to pay a chunk out of each transaction in credit card transaction fees. Retailers hate that.

They hate it so much that some are willing to lock out what seems the most appealing mobile-payment app yet, along with other NFC-based systems like Google’s and Microsoft’s.

CurrentC logo

(Via MCX)

A history of control-freakery
Who gave these companies the idea of turning off the ability to let people pay the way they want? Almost everybody else in mobile payments. This industry has a sorry history of control-freakery: the delusion that because software can tell them how, when, and where customers do business, they can force that data collection into the act of buying.

Rewind back to the debut of Google Wallet in May 2011. While Sprint welcomed this NFC-linked app, other carriers blocked it from working on their Android phones. AT&T, T-Mobile, and Verizon had their own NFC-payment system to push — never mind that the app, then called “Isis,” now rebranded as Softcard, didn’t launch nationwide until late 2013.

Apple, for its part, fenced off NFC in the iPhone 6 and 6 Plus for Apple Pay alone. Competing mobile-payment apps are locked out, along with such nonpayment applications of NFC as automatically linking an NFC-enabled camera over WiFi.

Apple can exercise a certain bossiness, because it makes a product that people like. As a category, wireless carriers don’t have the luxury of their customers’ affection. Their average score in the American Customer Satisfaction Index is 72, versus Apple’s 84. Sprawling, soulless drugstore chains like CVS and Rite Aid don’t rate much better than the carriers.

How to protest — and profit
You can’t do too much about wireless carriers throwing their weight around, but when a CVS, a Rite Aid, or another store rejects your phone payment, you can punish them by socking them with transaction fees. Instead of using their mobile payment system, whip out your credit card. And not just any credit card, but one with a higher transaction fee.

Say you’ve got three cards handy: a regular Visa, a fancier Visa labeled “Signature Preferred,” and an American Express. The first can cost between 1.15 to 1.65 percent for the merchant to accept, the second raises that to 2.1 to 2.4 percent, and the AmEx runs from 2.89 to 3.2 percent. (AmEx can pull that off because of its record of attracting spendier shoppers, but it’s not alone in employing this strategy.) Using MasterCard instead? Its “World” cards also cost extra, though not as much.

And since most of these premium cards reward your spending with cash or points back, the word for using them to punish a control-freak merchant can be not just “priceless,” but “profitable.”

Perhaps the retailers will get the message and begin to once again let customers pay for goods the way they want to.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.