Why CurrentC is (rightly) demanding exclusivity from merchants

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.With the introduction of Apple Pay, many small-business owners are weighing whether they should take the necessary steps to accept the new form of payment.”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. 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. 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. 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.

Donald Boeding, president of merchant services for Vantiv, a payment-processing firm in Cincinnati, said smaller businesses could buy the machines for $300 to $500. 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. This is a payment system that seeks to bypass the major credit card providers and avoid transaction processing fees by linking directly to customers’ bank accounts and debiting transactions directly.

Boeding recommended the VeriFone VX520, which Vantiv is selling for $250: “That model is rugged, has a powerful processor, great memory, and is an N.F.C. reader that is E.M.V.-compliant.” E.M.V. stands for Europay, MasterCard and Visa, the companies that originally developed the technology. 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.

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. The United States is moving toward widespread E.M.V. adoption, in part because the cards are seen as far more secure than the magnetic-strip technology used by American credit cards.

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. 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. Those who want to integrate Apple Pay into their existing system can simply replace the old swipe terminal with a new contactless one. “It’s like upgrading from an iPhone 4 to an iPhone 6; you’re upgrading and getting many new things with that,” Mr.

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 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. Pete Donat, senior vice president of the payment-processing firm First Data, agreed that integration should not be complicated for most small businesses. “When businesses get larger and have more comprehensive solutions, then integration gets more complex,” he said. “For small business, their point-of-sale provider will help them.” The majority of First Data’s merchant customers are small businesses, and Mr. Donat said the company is getting lots of calls from them about Apple Pay. “They fall into three buckets,” he said, “those who actively want to use it, those who are exploring it and those that want to wait and see.” Bret Csencsitz, managing partner at Gotham Bar and Grill in New York City, which has more than $10 million in annual revenue, is in the wait-and-see bucket.

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. 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.

Csencsitz said. “People have to first upgrade their phones and then get used to the idea of paying with it.” Other businesses, however, are not waiting for customers to ask. “I think within three weeks, we’ll have it,” said David Kalt, chief executive of Chicago Music Exchange, a music store that sells instruments and music equipment and has about $20 million in sales. 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. Kalt wants to incorporate the new technology because he said it would allow customers to spend less time conducting transactions and more time with sales reps, learning about the store’s products. 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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