Writing for ReCode, Walt Mossberg lays out his thoughts on MCX and their anti-Apple Pay tactics. You no doubt know all the details (if not, click here).
CVS had no comment for this article, but MCX did grant me an interview.
When I asked the CEO of the MCX consortium, Dekkers Davidson, what he and the consortium were afraid of, he said, “nothing.” In fact, he said that eventually there ought to be multiple “compelling” mobile payments systems.
However, Davidson explained, MCX insisted on exclusivity for now, to provide “breathing room” for the development of CurrentC. When I asked whether that meant the merchants didn’t want another system to catch on, he said no, and repeatedly explained what a massive undertaking CurrentC is. He added that the exclusivity rule would expire in “months, not years.”
And this nugget:
Davidson flatly denied that MCX had ordered CVS to turn off Apple Pay, and he speculated that CVS might have simply done so because it had signed the exclusivity policy. He noted that one MCX member, the family-owned Midwest supermarket chain Meijer, hasn’t shut off Apple Pay.
Is there a difference? If the agreement with CVS specifically calls for exclusivity, that’s equivalent to an order for exclusivity. And if they acknowledge exclusivity, why make the case that Meijer did not adhere to that policy? I can only imagine what’s going on in the MCX boardroom right now. Fear, confusion, and a lot of finger pointing.
This whole thing is so f-ing ridiculous. CurrentC is about one thing, and one thing only, freeing merchants from interchange fees (the shopper data is just an added bonus). If Apple Pay supported ACH transactions MCX would embrace it in a heartbeat. If Apple owned a financial institution and could provide their own fund transfers at <2% MCX would change its name to Merchant Apple Exchange.
The fact is that CurrentC will probably do OK. I see a lot more non-iOS smartphones in Wal Mart than I do Neiman Marcus. Take a look at that MCX partners list, not a lot of high-end companies there. The fact is that the companies who are a part of this are all very low-margin, so saving 2% per transaction represents a significant amount. And if the choice is increasing their margin by half, or more, or delighting their customers…well, I don’t see Best Buy going out of its way to delight customers now.
The fact that Best Buy hasn’t updated their terminals in all these years ( I live in Canada and there are a lot more NFC terminals then not now a days) is what’s ridiculous. The store asking you to buy expensive Electronics has one of the lowest tech terminals for years – even the cashiers joke about them. There is nothing wrong with coming up with an alternative pay method but when a tech store insists on using old tech countering customer convenience while upsetting you new tech is pretty hypocritical.
I think you’re probably right about CurrentC, in the short term it’ll likely do okay as people with non-NFC smartphones (let’s not forget there’s other systems than Apple Pay getting caught in this) start to use it, even if just for the novelty factor.
Problem is in the medium / long term CurrentC is one huge target for hackers with more personal data in one place than virtually anywhere else I can think of. It’s almost inevitable there’s going to be a security breach and a lot of people are going to get hurt.
Don’t
shop at a merchant who doesn’t accept All modern payment methods.
YOU are the customer. YOU deserve to be treated fairly. I’t YOUR money they’re taking (usually in the most convenient to the merchant method possible).
more corporate double-speak from the usual clowns.
retail margin is low, but it’s not 4% low. ive read PCs are pretty low, but theres a lot more in a Best Buy than PCs. in the grocery world (another low-margin game) where i launched products the retailer margin was 20%. (25% mark-up, 20% margin). in furniture-centric retailes like World Market, they demanded 100% mark-up (double the price on their goods, aka “keystone pricing”).
these guys aint broke.
WalMart’s operating margin is 5.53% (source: http://finance.yahoo.com/q/ks?s=WMT) and Best Buy’s is 2.44% (source: http://finance.yahoo.com/q/ks?s=BBY+Key+Statistics), so an extra couple of percent on operating income can make a substantial difference. Unlike other overhead like lights or rent, the interchange fees are at the transaction level, so paying Visa 2% less means a 2% income increase. That’s a LOT of bang for the buck.
“Seriously, this is only 36-48 months out. We’re certainly not talking years.”
They could stop paying interchange pretty easily by only accepting cash and checks. My guess would be that their profits would drop by a whole lot more than 2%. Think about how much money stores could make if they got their electricity for free.
Barely launched, Apple Pay has the retail world …. flummoxed. Wonder what Yukari Kane has to say.
I’m sure Davidson misspoke, and actually meant to say “lebensraum.”
I imagine she’s gathering colorful adjectives for her next book.