Whenever Apple makes creates a bridge that joins average people and advanced technology, there’s usually a coalition of asshats more than willing to dig in their heels against it, a move almost always motivated by a healthy dose of self-interest. On the surface, that’s what the members of the Merchants Customer Exchange (MCX) are looking to do to Apple Pay. The motive, which has some legitimacy for the member businesses (more on this misconception below), is that Apple Pay is stingy with customer information while the MCX allows merchants to “Protect and leverage valuable data to offer your customers better experiences and interactions throughout the path to purchase.” This kind of consumer data is valuable. Just ask Google, a company that has been able to sustain multi-billion dollar “moonshot” bonfires fueled by revenue generated by this kind of information. CurrentC, the MCX app that’s currently invite-only, interacts with users and culls their information through “Secure transactions and customer data storage.” Given that massive consumer data breaches at retailers like Target and Home Depot over the past year have cost consumers and retailers millions, it’s understandable that people are a little wary about having their information floating around “The Cloud.” It’s also (obviously) clunky as fuck compared to Apple Pay.
It would seem that in the case of the 50-something merchants that are members of the Exchange, the desire to obtain spending data outweighs their desire to have their customers served by the most user-friendly, secure transaction technology available. But the majority of these businesses would be wise to think about some the motives held by some of the bigger fish in the MCX pond. First, let’s take a look MCX’s current membership, organized loosely by category.
The only broad category with which Walmart doesn’t compete directly – yet – is restaurants. I’d argue that the category benefits the least from the incorporation of Apple Pay: many require you turn over your card to a server at some point in the payment process. How else would they be able to pencil transfer your credit card information? Southwest Airlines is another throwaway. It’s very strange to me that the commercial airline that most wants to paint itself as the approachable – dare I say “fun” carrier – would shun Apple’s mobile payment offering, but the fact that the purchase of an airline ticket is rarely made at the counter makes me doubt this will make a difference anyway.
The biggest retailer and the biggest player on the list is Walmart, the world’s largest company by revenue. There’s a few other names on the list that can be explained by their relationship. Sam’s Club was created by Walmart and named after its founder. Dunkin’ Donuts and Wendy’s are frequently deployed as food service options within Walmart’s stores (Walmart ended new McDonald’s installations in 2007).
But why would so many other retailers join Walmart in denying what is arguably the greatest advance in mobile payment technology? Irrespective of Walmart’s motivations, the rest of the names on this list have to know that Walmart wants to replace them. Many of them are being crushed by their relentless competitive pressure. Sears Holdings, the company which owns Kmart and Sears, just booked its ninth consecutive quarterly loss. Best Buy’s stock still hasn’t recovered from a disappointing 2013 holiday shopping season.
Grocery and convenience merchants are also squarely in the sights of the world’s largest retailer. In 1988, Walmart starting selling groceries. In 1993, it introduced its own brand. It now outsells all other grocery chains – and it’s not close.
Gas stations are also potential targets. Murphy USA, a spinoff of Murphy Oil, builds gas stations in the parking lots of several Walmart locations. You’d also think that gas stations would be perfect for a one-tap mobile transaction solution like Apple Pay.
The question for these businesses is this: is the data provided by some Google-esque coalition of merchants – data that can almost all be gleaned by using the merchant’s existing loyalty cards now – really more valuable than the convenience snub being mashed in the faces of consumers with ample disposable income? There are at least 25 million iPhone 6 and 6 Pluses in the wild. Walmart and Target are doing well enough to weather a storm of consumers who can – and will – shop with their feet. I’d argue that the Walmart and iPhone 6 users demographic is different enough to be measurably less impactful than, say, the overlap of iPhone 6 owners and Banana Republic shoppers. Why in the world would merchants stand with a competitor poised to crush them? Wouldn’t these businesses want every advantage they could get?
I guess we can ask the outgoing CEO of Best Buy next year when their business becomes the next Circuit City.
Update: One obvious factor that I hadn’t discussed is the role of credit card processing fees, which is usually a 2-3% fee paid by merchants to credit card companies for the use of their cards. The thinking is that if enough merchants get together and make CurrentC a thing, they can avoid – or at least negotiate down – those fees. If this is the factor that MCX members are hanging their Apple Pay objections upon, it’s even worse than any denial of consumer data. CurrentC seeks to link to your checking account to affect transactions, which is something I had to read twice. Let me get this straight: MCX members, many of whom have already previously fostered their own data breaches – data that included credit card information – wants access to my real money using the cloud to store my data? In a nutshell, MCX wants to sidestep a cost of doing business, forgoing the concept of credit cards altogether by accessing your checking account through a kludgy, inferior customer-facing app.
Update 2: Well that was fast. According to Tim Cook, speaking at the WSJD Live event (via Gruber), after one week in operation, Apple is already the leader in contactless payments. MCX, on the other hand, has been around since 2011. Their invite-only app is currently testing in “some retail locations in Minnesota.”
Update 3: Gruber serves up another compelling link: a NYT Magazine look at Target data collection practices and why your spending information is so valuable to merchants.