If the debate over credit card fees isn’t the main reason some of the nation’s largest retailers are banning Apple Pay from their stores in favor of a competitor app called CurrentC, someone should tell Walmart exec Mike Cook.
Execs from the consortium of retailers called MCX insisted recently that the group’s backing of CurrentC — and ban of Apple Pay — had little to do with their issues with credit card fees, even though the beta version of the app doesn’t accept traditional cards. Instead, they said, MCX was creating CurrentC mainly to craft a system that combined loyalty offers and a mobile payment system in one.
But the actions of Cook, Walmart’s assistant treasurer and one of the masterminds of MCX, tell a different story. At a recent payments conference called Money2020, Cook’s public questioning of a top Visa executive made it clear that the credit card debate is alive and well and a big reason why Walmart isn’t accepting Apple Pay. Cook stepped to the microphone in the audience during the Q&A session of a panel discussion and made it clear he was as interested in simply making a point as he was in getting an answer to his questions. If you’re familiar with payments-industry lingo, feel free to watch the video now. If not, I suggest reading on and then watching the clip afterward.
Earlier in the panel, Visa’s Jim McCarthy had mentioned that purchases made in stores using Apple Pay typically qualify for what are called “card-present rates.” Merchants pay banks a fee every time a credit card is used for a purchase. Card-present rates are the cheapest category of fees; since the card is being swiped, the thinking has historically been, there is a lower chance of fraud compared to card-not-present transactions where card information has to be manually keyed into the payment device in a store or on a website.
Now Cook wanted to know, in effect, why McCarthy was boasting about Apple Pay qualifying for this cheaper transaction rate when card-present transactions are much more common than card-not-present transactions in stores. McCarthy started to answer before Cook cut him off.
“Hang on just a second, Jim, and then I’ll let you answer the question,” Cook said. “If you let me say the question, maybe you can answer it better.”
McCarthy was visibly annoyed while the moderator, industry investor and consultant Tom Noyes, cringed. Cook then questioned McCarthy about why purchases made in an app using Apple Pay do not qualify for card-present rates while those used for a purchase in a physical store do. It was a valid question and McCarthy answered it in technical terms. Essentially, he said, the in-store Apple Pay transaction is processed in accordance with one payments standard that allows it to qualify for the lower rates, while the in-app purchase is not.
Cook didn’t like the answer.
“Because that’s a rule that you all make?” Cook deadpanned.
This exchange is noteworthy because it epitomizes the mistrust and disdain between Walmart and the credit card networks. Walmart is convinced that the fees merchants have to pay banks when a credit card is used in their stores is too high. And because the credit card networks are the entities that set the pricing framework for the fees, Walmart and other retailers blame them.
Since Apple Pay supports Visa and Mastercard credit cards, Walmart and other MCX retailers believe the iPhone-based payments service just perpetuates the traditional payments fee structure they despise. The MCX’s CurrentC app, on the other hand, favors transactions funded by store-branded cards or a connection with a customer’s checking account — all of which carry lower fees than credit card purchases.
MCX’s CEO said at the conference that the app will also launch with some traditional credit cards, though he didn’t say which brands of cards. Don’t expect to see traditional Visa and Mastercard credit cards in CurrentC anytime soon, execs from those two companies indicated to me in an onstage interview at the conference.
When you watch the interaction between Cook, one of the biggest champions of MCX, and Visa’s McCarthy, this should come as no surprise. Nor should the realization that Walmart will never accept Apple Pay, the service that the credit card networks support.
This article originally appeared on Recode.net.