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What Are the Anti-Apple Pay Merchants Afraid Of?

By barring Apple Pay from their stores while they develop a rival system, CVS/pharmacy and other merchants are taking a stand against consumer choice.

Rob Wilson /

I’ve been a regular customer at CVS/pharmacy, the country’s second-largest drugstore chain, for 20 years. I’ve spent a small fortune there over that span, visiting several times a week to pick up everything from milk to toothpaste to prescriptions.

But lately, I’m not feeling very happy with CVS, because of a business decision it made that curtailed my choice of how I could pay in its stores with my own credit cards. In fact, I’ve been taking more of my shopping down the road to CVS’s main rival, Walgreens.

Why? Because CVS has abruptly cut off my ability to pay for my purchases on my expensive new iPhone 6 with the first really excellent mobile phone payment system I’ve seen: Apple’s new Apple Pay, which is quicker and more secure than plastic.

And it appears to me that the drugstore chain, and other merchants with which it is allied, are afraid of competition, afraid that I might get hooked on Apple Pay (or some competing system, like Google Wallet) before the drugstore chain and its fellow merchants can come out with their own rival mobile phone payment system, promised for next year.

In other words, I’m wondering if CVS, whose name originally stood for “Consumer Value Store,” really believes in letting consumers choose what’s valuable to them. By contrast, Walgreens supports Apple Pay, along with plastic credit cards.

Here’s what happened.

Two weeks ago, Apple introduced Apple Pay, its handier, more secure way to pay at stores with your existing credit cards, using its latest iPhones. The system only worked at stores with certain modern payment terminals. Luckily, CVS — while not an official partner of Apple’s — had the right kind of payment terminals. So I began using Apple Pay at CVS. It worked well, for me and for other Re/code reviewers who tested it at CVS while reviewing Apple Pay.

Before CVS shut off Apple Pay, it worked fine there.
Before CVS shut off Apple Pay, it worked fine there.

Then, five days later, with no announcement to customers, and no explanation, CVS shut off the feature in its payment terminals — a wireless capability called NFC — that allowed Apple Pay to work. In doing so, it also cut off a few other pay-by-phone systems, most notably Google Wallet.

To make matters worse, when CVS finally did issue a statement, a few days later, it seemed misleading. It said: “At this time, CVS/pharmacy cannot accept Apple Pay or other mobile payments that use NFC technology. We are in the process of evaluating mobile payment options for our customers.”

The problem with this was that, as we and many others knew firsthand, CVS could in fact accept Apple Pay and other NFC-based mobile payment methods. It had just abruptly decided not to do so. (You can see it working fine at CVS, before the shutdown, at about the 1:20 mark in this Re/code video.)

It soon came out that this was all about something that had little to do with technology. It turns out that CVS is one of about 40 merchants in a consortium that formed in 2011 to develop their own mobile-phone-based payment system.

The consortium, called the Merchant Customer Exchange, or MCX, is in large part all about eliminating, or at least reducing, the fees banks charge retailers for swiping credit cards.

That’s fine by me. But what’s not fine is this: MCX has an exclusivity rule that bars members from allowing other mobile-phone payment systems while it develops its own payment app, called CurrentC, which is expected to become available in the first half of 2015.

So, maybe one way to explain the word “cannot” in CVS’s statement is that, while it is capable of allowing consumer choice in mobile payments, it is barred from doing so by the consortium’s rules. But it’s interesting that CVS didn’t cut off NFC when the only systems that used it, like Google Wallet, were essentially failures. It did so only when one that looked like a winner, from Apple, appeared.

I haven’t had a chance to try CurrentC, which is in limited beta testing at unspecified retailers in unspecified places. From what I’ve been able to glean, it may be better than Apple Pay in some ways (for instance, it’s being built to handle loyalty cards, which Apple Pay can’t do yet) and worse in others (for instance, it has already been hacked).

My big question is: Why the exclusivity rule? What are these retailers (including giants like Walmart and Lowe’s) afraid of? Aren’t they all about competition? Why shouldn’t customers who can and want to do so be able to use Apple Pay now, and then decide later, when CurrentC arrives, if they prefer the merchants’ system?

Of course, any retailer can accept or reject any form of payment it desires. CVS could announce tomorrow that it will only take cash. But Apple Pay is just a quicker, more secure, way of paying with your own credit cards — the very same ones that CVS accepts in plastic form. And CVS has already invested in the terminals that accept these familiar cards in digital form.

The planned CurrentC app by the MCX retailers’ consortium
The planned CurrentC app by the MCX retailers’ consortium

Even Apple, notorious for keeping a tight grip on its products, allows fierce competitors like Google, Amazon, Spotify and Microsoft to offer their apps on its phones and tablets. (Even the invitation-only test version of CurrentC is in Apple’s app store.) And CVS stocks multiple brands of most items, even those that compete with its house brands.

CVS had no comment for this article, but MCX did grant me an interview.

When I asked the CEO of the MCX consortium, Dekkers Davidson, what he and the consortium were afraid of, he said, “nothing.” In fact, he said that eventually there ought to be multiple “compelling” mobile payments systems.

However, Davidson explained, MCX insisted on exclusivity for now, to provide “breathing room” for the development of CurrentC. When I asked whether that meant the merchants didn’t want another system to catch on, he said no, and repeatedly explained what a massive undertaking CurrentC is. He added that the exclusivity rule would expire in “months, not years.”

Davidson flatly denied that MCX had ordered CVS to turn off Apple Pay, and he speculated that CVS might have simply done so because it had signed the exclusivity policy. He noted that one MCX member, the family-owned Midwest supermarket chain Meijer, hasn’t shut off Apple Pay.

Maybe I shouldn’t single out CVS for refusing to allow competition in mobile payments now. But of all the retailers involved, CVS is the one I have the closest relationship with, and the biggest one that allowed Apple Pay for a while before shutting it off. (Another, smaller drugstore chain, Rite Aid, also allowed Apple Pay briefly, but I don’t shop there.)

I simply believe that people who respect their customers and have faith in their own technology products should welcome competition, and that consumer choice should be a paramount value in retailing.

This article originally appeared on

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