The Merchant Customer Exchange (MCX) — many big retailers’ answer to Apple Pay — held a press conference Wednesday, in which its CEO Dekkers Davidson on several occasions dodged the following question: Why is MCX requiring its merchant members to use its CurrentC mobile payments platform exclusively and not accept Apple Pay?
It’s thought that this policy is the reason two MCX member companies — the pharmacy chains Rite Aid and CVS — have now shut off support for Apple Pay.
CurrentC is a mobile payment system that works just like the Starbucks payments app and connects directly to a consumer’s bank. This way, the merchant is relieved of paying a 2-3 percent interchange fees to the credit card companies on each transaction. Five to six million people use the Starbucks app to pay for their coffee every week.
The answer to the question Davidson kept dodging is fairly simple: There’s a mobile payments war going on, and nobody really wants there to be two winners. One is enough. And further, CurrentC has an excellent chance of winning out, so it doesn’t have to act like an also-ran — regardless of the fact that the tech media has already declared it the loser.
Apple is battling for the hearts and minds of consumers with a sexy user experience, partnerships with credit card companies and banks, and the power of its brand. It hopes that by capturing consumers, it will force merchants to fall in line.
MCX is fighting for the hearts and minds of merchants with the offer of removing the credit card middleman and eliminating the interchange fees, as well as with the prospect of reaching far more consumers — meaning virtually everybody who doesn’t own an iPhone 6. (Fewer than a million people are set up to use Apple Pay so far.)
Many observers don’t understand how powerful MCX’s “no credit card fees” message is to merchants and how little love merchants have for credit card companies and issuing banks. Retailers paid approximately $48 billion to credit card companies in 2013, according to a Business Insider report.
Merchants have sued credit card companies several times in the past 15 years because because of high interchange fees. In early May, Walmart sued Visa for $5 billion, accusing the company of charging excessive transaction fees. That case is still ongoing. In December, a federal judge in New York approved a $5.7 billion class-action settlement between merchants and Visa and MasterCard, even though thousands of retailers called the settlement inadequate and unfair.
Every time the merchants have tried to sue, the card companies and banks have cried “we can’t spare the money” to ease the interchange fees, a credit card industry source told VentureBeat. Then the banks turn around and offer Apple a percentage of each transaction, while the merchants have to pay just as much as ever. This has many merchants fuming.
And Apple is playing the exclusionary game every bit as much as MCX. It’s true that you can find the CurrentC app in the App Store, but it’s also true that Apple won’t allow any other payment system access to the NFC chip in its phones. Why would it?
Only time will tell which system will win. What seems clear is that it’s going to be a much more interesting fight than the one being framed in the media.