How mobile payment systems are perceived today

November 11, 2014

The introduction of Apple Pay and the upcoming introduction of CurrentC into the market is changing the way businesses and consumers view retail activity and payment systems.

The introduction of Apple Pay and the upcoming introduction of CurrentC into the market is changing the way businesses and consumers view retail activity and payment systems.

Apple pay is meant to be safe
Apple Pay is meant to provide a safe way to make purchases because it does not store customer card information or user data and instead gives retailers a device-generated token. Jim Maholic, vice president at Hitachi Consulting, commented that as a chief information officer, he views Apple Pay as being safe.

“As a CIO, I [would] feel better if I have more customers using Apple Pay, because I haven’t exposed their numbers to risk,” said Maholic, according to CIO.

One glaring problem with Apple Pay is that it is only available on the iPhone 6 and iPhone 6 Plus. It may be months or even years before a significant percentage of consumers are able to use the new mobile payment technology. Maholic believes, however, that people who have Apple Pay now are most likely affluent and will choose to do business with merchants that accept the technology. That may be important for retailers looking to lock down a solid customer base.

“There’s a certain number of affluent customers who use the iPhone 6 … Now that I’ve got that customer, it’s harder for somebody to steal that customer,” Maholic added.

Jerry Sheldon, analyst at IHL, believes it is too early to judge the success of Apple Pay. It is currently not known how many people will use Apple Pay and who is willing to pay for it. The signs are good so far, but enough information is not yet available to form a complete picture.

“That’s a small number of retailers and a small number of compatible devices for it to work on,” said Sheldon, according to the CIO.

Sheldon also commented that the technology infrastructure needed to support Apple Pay is not yet available in all retail locations.

Retailers try to fight back with CurrentC
Last month Rite Aid and CVS disabled their NFC scanners, making it impossible to accept Apple Pay and Google Wallet. Both stores are part of the Merchant Consumer Exchange, a group that includes retailers Wal-Mart and the Best Buy. Together they are planning to introduce their own mobile payment system – CurrentC. Their system will use QR codes instead of NFC technology and will save retailers transaction fees, typically in the range of 2 percent, paid to banks for each transaction.

Consumers are already unsure about the safety of their financial security, especially after a year of iCloud hacks and retailer credit card breaches.  It is assumed that consumers will gravitate toward the tokenization method used by Apple Pay instead of CurrentC, because of the added security it offers. Despite this, Sheldon is not so sure that Apple will ultimately change the payment processing game because they are trying to reinvent something that is quite simple and easy to use – the credit card.

“Will Apple be successful where other companies have had a much harder time overcoming 40 years of simplicity?” Sheldon asked, according to CIO. “Using a credit card is super easy and super quick.”

The outlook going forward
The question can be asked if Apple Pay and CurrentC can coexist. It appears that while they can, many consumers will not be thrilled to find out that they cannot use Apple Pay at major retailer stores. While Apple Pay is exclusive in that it can only be used with an iPhone 6 or iPhone 6 Plus, the trend in the past has been for Apple’s phones to perform extremely well. Over the next year, the market will continue to be flooded with newer model iPhones and consumers will increasingly try out Apple Pay. The retailers who are pushing for CurrentC may find themselves facing increasing criticism.

Apple Pay supports Visa and Mastercard credit cards and companies that form the Merchant Consumer Exchange believe the iPhone-based payment service will continue to support traditional payment fee structures – that they are not fond of. CurrentC allows transactions funded by store-branded cards or customer’s checking accounts, both of which feature lower fees according to Recode. 

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