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Apple iPhone's Mobile Payments Expected to Include CVS and Walgreens

With more than 15,000 locations combined, acceptance by the two chains will give Apple a huge footprint if all of their stores are involved.

Anthony Quintano for Re/code
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

Apple’s upcoming mobile payment system will get a big head start with the country’s two largest pharmacy chains coming on board.

CVS and Walgreens are expected to accept purchases made with the new iPhone payment system, details of which Apple plans to announce Tuesday, according to a person briefed on the plans. With more than 15,000 locations combined, acceptance by the two chains will give Apple a huge footprint if all of their stores are involved.

Getting the two pharmacy giants on board is a coup for another reason: People shop there often — weekly or even daily — giving Apple mobile payments the type of frequent transactions that could be key to getting people accustomed to the new service. And payments could become an important new revenue source for Apple.

Representatives for Walgreens and Apple declined to comment. CVS spokesman Mike DeAngelis said, “We don’t know what Apple may be planning in terms of a payment system so it is not possible for us to say whether it is something our stores may be able to accept.”

Apple’s mobile payment system is expected to let shoppers wave or tap their phone at checkout terminals, in part using a wireless technology known as near field communication, or NFC, to transmit payment information from a phone to a store’s checkout system. The soon-to-launch iPhone 6 is expected to be the first Apple device to include NFC technology. Sources caution that Apple’s payment system may in some cases employ additional wireless technologies either in conjunction with, or in place of, NFC. The new payment method will also likely include the use of fingerprint identification already available on the latest iPhones as an added security measure.

Still, big questions remain. Paying with cash or a card isn’t difficult, and mobile wallets so far haven’t provided enough additional value to change that behavior. Separately, no matter how secure Apple’s mobile payments system is, some customers may feel uncomfortable using it in light of the recent hack of celebrities’ iCloud accounts.

Shoppers in the U.S have so far failed to widely adopt mobile payment schemes like Google Wallet, or ones derived from the wireless carriers themselves, but industry analysts and executives believe Apple can change that. One key difference here is Apple makes both its phones and its operating system, so wireless carriers can’t block customers from using Apple’s mobile payment technology as they did with Google. Apple’s mobile payment system will be fully integrated in its phones, and if a carrier wanted to block the technology, it would have to stop selling the new iPhones altogether. And we all know that won’t happen.

If Apple gives shoppers a big enough reason to adopt its new payment system, the company could reap big financial benefits. In the short term, Apple could take a small cut of each transaction and/or a small fee for each card stored in the digital wallet. In the long term, a successful wallet could help attract new customers to Apple devices and retain current ones who were thinking about leaving. The payments foray also aligns with Apple’s long-held strategy of continuing to expand its products and services portfolio to create a growing personal technology ecosystem.

CVS’ participation does raise questions about whether it will still be part of a competing mobile payment system called MCX, a project backed by some of the biggest retail chains in the country, including Walmart, Target and, yes, CVS. This consortium is developing its own payment app that will rely on barcode scanning instead of NFC to make purchases in its network of stores.

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