Mobile Payments Taking Over the Globe, Apple (NASDAQ:AAPL) Pay Tip of the …

31 Oct 2014 | Author: | No comments yet »

16 Retailers Apple Must Land for Apple Pay to Succeed.

LOS ANGELES — It’s as if the Three Stooges had been given the assignment of introducing a new and safer way for consumers to pay at some of the biggest retail stores. CurrentC—a mobile payment system developed by a consortium of major retail chains—has made headlines lately for brazenly blocking Apple Pay transactions.Apple Pay’s recent launch in the U.S. is the latest indication that paying for things with our phones will become more normal, but for most, “normal” remains some way away.

“Retailers (that are part of Merchant Customer Exchange) are certainly going to give it a go on their own, they spent the last few years and money developing this,” said eMarketer analyst Bryan Yeager. “Ultimately if there’s enough consumer demand for it in the long run, maybe they will accept Apple Pay, but they’re very much intent on trying to make a go at their own mobile wallet.” Although nascent, the appetite for mobile payment is growing.The mobile payment battleground is currently in chaos, with customer loyalty programs, retailer apps and Apple Pay each marshaling troops, attacking supply lines and forming shaky—sometimes short-sighted—alliances.

According to a new study, two-thirds of consumers are concerned about their financial data being stolen at retailers, and many of them seemed to voice those concerns this week. The heat CurrentC faced from that poor strategic move is nothing, though, compared to the trouble the embryonic payment system is in now, thanks to news of a data breach. MasterCard describes normal as being a score of 60 out of 100 on its “Mobile Readiness” index, and no part of the world has reached that level yet.

The difficulty of the task became clear this week when drugstore chains CVS Health Corp (CVS.N) and Rite Aid (RAD.N), in a move apparently aimed at shoring up the retailers’ pay system, stopped accepting payments on Apple Inc’s (AAPL.O) iPhones. I would probably say no.” Apple Pay lets users of the newest models of iPhones and iPads pay for purchases through their devices on credit or debit card accounts without having to show their card or account number. On Monday, during a tech industry conference in California, Apple chief executive Tim Cook said the payment system had more than one million activations in the first three days after it became available, and is now more widely used than any competing payment system. CurrentC, run by the Boston-based Merchant Customer Exchange (known as MCX), has the misfortune of following in the footsteps of Apple’s hugely successful mobile payment launch, which nabbed 1 million new customers in three days and has drawn rave reviews.

Merchants Customer Exchange (MCX)—the organization behind CurrentC—confirmed Wednesday that it was the victim of a hack, though, compromising the email addresses of the early adopters. MasterCard notes that 89% of Kenyans are familiar with mobile payments and a third of Kenyan gross domestic product goes through M-Pesa, a mobile-money service owned by Vodafone Group PLC’s Safaricom. Many payment experts said they are skeptical that the retailer-backed system, known as CurrentC, can gain traction, let alone thwart Apple Pay, a payment system launched by the iPhone maker last week. Apple Pay keeps payments anonymous—so anonymous that retailers will lose some valuable information about shoppers: what they’re buying, what they’re returning, what they might be interested in next.

It solves the security hurdle (just who are you giving your credit card to?) and speed (fumbling for your wallet and credit card.) But it’s not perfect. Tim Erlin, director of IT risk and security strategy for Tripwire, says, “As long as this incident is constrained to the loss of email addresses, I wouldn’t expect it to be material to their business plans. By next October, retailers will be required to have point-of-sale terminals that work with the new EMV chip-and-pin security standard for credit cards. They’ve made it easy, and they’ve made it fun.” Contacted by CBC News, a spokeswoman for Apple would not say when or if there were any plans for offering the system into Canada,. The reason Singapore is the top of the table is because 100% of the population is covered by a mobile network and the country’s telecommunication system is strongly regulated.

Those terminals usually also have the “near-field communication” capability to work with Apple Pay, Google Wallet and Softcard systems, but they aren’t automatically enabled to work with NFC. In a press conference Wednesday, CEO Dekkers Davidson, when asked whether stores could enable consumers to use both Apple Pay and CurrentC, said, “There is no harm from competition. Indeed, Jack Ma, executive chairman of the Chinese e-commerce giant Alibaba, told the same audience at this week’s California tech conference that he would be “very interested” in teaming with Apple to bring Apple Pay to China. The city-state also scores well for “mobile commerce clusters,” meaning that there is useful cooperation between banks, mobile networks and the government. Even 20% said they were more comfortable using digital wallets on their phones instead of credit cards, another sign of how the Target and Home Depot breaches have made consumers wary.

If you happen to own an Android phone, you can’t use the Apple Pay system either. • The new iPhones have built-in NFC (near field communication) chips that talk directly to pinpads near the cash register. It also doesn’t help that many of the retailers that comprise the membership of MCX have damaged reputations and tarnished trust with customers as a result of past data breaches. In Hong Kong it’s already normal for people to pay for goods with their Octopus card, primarily used for public transport but also widely accepted in stores and restaurants. Many Canadian retailers and services already use similar technology with the use of Paypass, which allows users to just tap their debit or credit cards on terminals in order to pay.

Eventually, he said, “We expect that all cards will be welcome at CurrentC.” Wal-Mart, which has made little secret of its disdain for paying processing charges, is suing Visa for $5 billion for what it says are excessive card swipe fees. Not only would Apple Pay have to comply with Canada’s privacy regulations, it would also need the approval of the banks, which are much more conservative than their American counterparts.

Both MasterCard and Visa have set October 2015 as a deadline to phase out swipe-and-sign magnetic strip cards in favor of ones with chips which users could either sign or activate with a PIN. Retailers paid $66 billion in credit-card-related fees in 2013, out of $4.5 trillion in spending tied to major U.S. cards, according to the Nilson Report.

In contrast to Apple Pay, which encrypts payment data and keeps it out of the hands of retailers, CurrentC connects directly to a customer’s bank account. He predicted that Apply Pay is at least a year away from coming to Canada and noted that U.S. banks and credit card issuers can make money from debit transactions while Canadian financial institutions do not. “There are a lot of regulatory things they will have to work out,” he said. “We have a mobile wallet.

For a given purchase, customers must take out their phones, unlock them, open the CurrentC app, open their cameras, then point their phones at one of those blocky QR codes, which validates the transaction. There would be no pooling of data across retailers, Davidson said, and shoppers can opt to remain anonymous. “Consumers will determine how they are marketed to or not marketed to,” he said. Forrester analyst Andras Cser said by email that, in general, mobile payments are more secure than traditional forms of payment, partially because they use encrypted or tokenized payment data, but also because app stores like iTunes and Google Play curate software to be virus and malware-free. “Mobile payments are also safer since they can require stronger payment time authentication than just 3D Secure [which verifies the shopper’s identity at the time of purchase] or PIN code: users may be asked to provide biometrics authentication (fingerprint and voiceprint).” Cser expects that over the next year, mobile payment providers will use even more information to authenticate transactions, including geolocation data and device use patterns to determine how likely it is that the purchase is authentic.

There are larger issues involved with CurrentC when it comes to privacy, and fraud protection for customers. “CurrentC’s approach raises questions as to liability if there is a compromise of the system,” suggested Ken Westin, security analyst with Tripwire. “The Apple Pay model has been a bit more focused on privacy and security with their technology to help gain traction and trust in the market place. MCX says CurrentC will be secure, an assertion that was tested on Wednesday when the group confirmed that hackers had obtained the e-mail addresses of some participants in a pilot program. Michael LeBlanc, senior vice president of digital retail for the Retail Council of Canada, said the organization supports any that makes for a better shopping experience for our customers, “The other thing we look for is something that helps our operating costs and ultimately allow us to lower our costs to consumers. Merchants upped the ante in this little mobile payment war when MCX members CVS and Rite-Aid disabled their NFC pinpads when they discovered that iPhone users were using it at the check-out.

However the battle plays out, contactless transactions via mobile devices are likely to continue rising, from three billion projected for this year, to more than 9.9 billion globally, according to Juniper Research. The pinpads were installed to be used with Google Wallet, a system that debuted two years ago and never took off much beyond the installation of the NFC terminals. At FindTheBest, we took a close look at America’s top 100 retailers by sales volume to see who’s out, who’s in, and who Apple has a shot of winning over. MCX members have made up-front payments of $200,000 to $500,000 to join the group and signed multiyear agreements, according to people familiar with contract terms. “It is ultimately about providing the choice to customers because no one really knows how this space will evolve,” said Deepika Pandey, head of digital marketing at the pharmacy.

With apologies to smaller companies like Petco and Panera Bread, here were the brands we picked from (sales estimates from FindTheBest’s Companies topic): We’ll start by reviewing Apple’s key partners and biggest opponents, then count down the fence-sitters. Whole Foods is a decent start, but Kroger, Safeway and Publix are all either ambivalent or anti-Apple Pay, which could spell big trouble for the service. Still, if Apple Pay were to really take off, you might expect a few of these to betray the CurrentC faithful and start accepting payments through Apple. The former would love to build back customer trust after its recent, infamous credit card breach—and security is one of Apple Pay’s best features. Starbucks would still need to add the NFC technology across its 20,000 stores, and a true Apple Pay solution might cannibalize its popular (and successful) iOS app.

Taken together, these companies could win Apple more users in a crucial young demographic, the sort of customers that could create a long-term foundation for the new mobile payment service.

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