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Tim Cook – you don't have the RiteAid stuff

When Apple honcho Tim Cook took to the stage to introduce Apple Pay, he promised it would simplify the way people pay for goods and services, but the road to that goal has not been smooth since.

Last week came the news that some Apple Pay users were getting charged twice for the same purchases. Teething pains are to be expected, but by the end of the week there was a new problem. Two of the biggest drugstore chains in the US, CVS and Rite Aid, said they were dropping support for Apple Pay – and Google Wallet, to boot.

Internet users have had the weekend to rage about CVS' and Rite Aid's decision, and many members of Reddit have proposed a formal boycott of the companies for trying to bully the most valuable company in the world (Apple) and the online titan behind Wallet (Google). But what was the reason for the retailers' move?

Both CVS and Rite Aid have confirmed to El Reg that they are dropping Apple Pay, both saying that they are evaluating various forms of mobile payment options for customers. While neither mentioned names, both firms are members of Merchant Customer Exchange (MCX), which last month unveiled its own payment system, dubbed CurrentC.

CurrentC is a radically different system to Apple Pay. The MCX software, which runs on both iOS and Android, uses QR codes to scan and log payments and links its code into the payer's bank account or debit card. Members of MCX include Walmart, Gap, KMart, and Southwest Airlines.

The QR system has a number of advantages, chiefly that is it's relatively low-tech, so it can be installed on a wide range of handsets without requiring specialized hardware. It's low cost, and QR codes are an established technology that most people know how to handle.

Apple Pay, on the other hand, relies on near-field communications (NFC) hardware in both the handset and the point-of-sale terminal to exchange data for transactions, which it links to the user's credit or debit card for payment. It's also a single-touch system, rather than requiring users to fire up a reader, scan a price, input it and then confirm the transaction.

"CurrentC will offer customers a simpler, faster, secure way to checkout at their favorite merchants," said MCX's CEO Dekkers Davidson. "At full scale, CurrentC will be accepted in more than 110,000 merchant locations across the country, giving consumers unmatched access to their favorite retailers."

Cupertino, on the other hand, says Apple Pay is already accepted in 220,000 retail locations.

The big advantage for the retailers of CurrentC system is that linking shops directly to the banks eliminates the payment processing charges that would otherwise go to credit card companies.

There's also the point that no industry sector wants to let Apple dictate terms. Steve Jobs successfully browbeat the music industry into accepting iTunes, and other companies, having seen what that does to their control of markets, aren't keen to let Cupertino have the whip hand again.

Eventually all MCX members are expected to run the CurrentC system on their terminals. Because the system is only in pilot mode at the moment, the software is available by invitation only and the group isn't responding to press questions about their code, but what details are out there are causing some concern.

First, there's the range of information that users have to provide to sign up to CurrentC. A lot of people are twitchy about handing over detailed bank account information to a third party – and given the spate of attacks against retailers like Staples and Home Depot, they have reason to be.

MCX points out that there should be no leakage. All transactions between the POS terminal and the purchaser's bank are conducted using a "token placeholder," and customer information is stored on the payment system's servers in an encrypted cloud vault – and we know how secure those can be.

There are also suggestions, as yet unconfirmed, that the CurrentC software also has the capability to deliver advertising to users' handsets. This could be very lucrative for retailers, but somewhat annoying for customers.

Apple, on the other hand, stores none of this data (which is a bonus considering the firm's recent iCloud woes) and instead leaves transactions solely between the card holder and the end user. People familiar with Apple's system have confirmed to El Reg that it will carry no advertising of any kind.

On the face of it, you can see why retailers like CurrentC – which makes the decision by CVS and Rite Aid to support Apple Pay immediately after launch somewhat surprising.

"That's one of the weirdest things about this whole affair. One day it worked and the next it didn't," Patrick Moorhead, principal analyst at Moor Insights and Strategy, told The Register.

"It could be the Apple Pay decision was a matter of it flying under their radar. Then it's possible that some people from MCX potentially strongarmed the two, or sent them a note to stop using Apple."

Whatever the truth of the matter, it's clear that Apple Pay has hit a major roadblock. Of the other MCX members The Reg contacted, only Walmart responded, saying that the firm has no plans to implement Apple Pay, since it has no NFC-equipped terminals to handle transactions.

In the end, Apple Pay's success, or lack of it, will depend on many factors. But if retailers don't want to use it, then Apple will have to rely on a consumer boycott of CurrentC to push the big chains into accepting Cupertino's virtual currency system.

"The feedback we are getting from customers and retailers about Apple Pay is overwhelmingly positive and enthusiastic," Apple told The Register in a statement. "We are working to get as many merchants as possible to support this convenient, secure and private payment option for consumers. Many retailers have already seen the benefits and are delighting their customers at over 220,000 locations." ®


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