Just a few weeks ago, after introducing Apple Pay, two major pharmacy chains, Rite Aid (RAD) and CVS (CVS), rejected Apple’s (AAPL) version of the future within a week: Both disabled Apple Pay (as well as other tap-to-pay mobile payments systems Google Wallet and Softcard), citing security risks.
But more speculations came out subsequently that names Rite Aid (RAD) and CVS (CVS), as members of the Merchant Customer Exchange consortium, led by Walmart (WMT), Best Buy (BBY), and about 50 other retailers. They have been working on their own mobile payments system or ‘mobile wallet’, called CurrentC. Unlike Apple Pay, which works in conjunction with Visa (V), MasterCard (MA), and American Express (AXP), CurrentC cuts out the credit card networks altogether. The benefit to the merchants is clear: They would save the swipe fees they now pay to the credit card companies, which average about 2 percent of the cost of transactions.
CVS hasn’t publicly explained itself. Rite Aid spokeswoman Ashley Flower defended the company in an e-mail to Bloomberg BusinessWeek. “We are continually evaluating various forms of mobile payment technologies, and are committed to offering convenient, reliable, and secure payment methods that meet the needs of our customers,” she wrote.
This latest bit of mobile payments news has technology companies wondering just what payment-processing companies will come up with to compete against Apple Pay, CurrentC, and other systems. However, it's unlikely that these systems signal the death of other payment solutions in stores and online.
Are These Systems Secure?
The MCX idea is simple – you download the CurrentC app on your mobile and connect to a bank account number. During the time of a purchase, CurrentC displays a QR code that you present to the cashier. The code is scanned, authorization happens and the money is directly pumped out of your bank account. The set-up is still a bit sketchy, as it requires the social security number and driver’s license in addition to the bank account info.
On the other hand, Apple has recognized a strong bond between their customers and their credit cards. On an average, a person carries 3.7 cards with an outstanding balance of $7.3K. Apple Pay looks at making the relationship more secure and convenient. Set up is simpler and the credit card that’s on file for iTunes is used as default. All you have to do is to launch passbook and enter the CVV number, which is on the back of your card. If you want to use a different card, you take a picture of the card and the passbook verifies it with the issuer.
Many rightfully pose the question of whether mobile wallets are a safe alternative for consumers. These systems have arrived at a time when 69% of Americans worry "frequently" or "occasionally" about having their credit card information stolen by hackers, according to a recent Gallup poll. Within 72 hours of its launch, more than one million credit cards were registered with Apple Pay. That's a lot of data that could be compromised later on. Mobile wallets remove the various security checks that physical credit cards already have, such as the three-digit codes on the backs of Visa cards or the cardholder's signature.
Many retailers already use mobile technology, but in different ways. In an effort to provide quicker, simpler transactions to consumers, many businesses have begun using mobile payment processors on tablets and smartphones. These have the advantages of being 100% secure and PCI compliant in order to keep customer data safe. They also tend to cost far less than traditional payment terminals, which is beneficial for small businesses.
What's Next for Mobile Payments?
Both mobile wallets and mobile payments technology are evolving, and they exist to provide more convenience to customers and businesses alike. Overall, however, consumers who are tired of data breaches and credit card fraud have spoken: they need more secure payment solutions to protect their information, and they look to credit card payment processing companies and retailers to provide that safety.