Apple Pay and Retailer Moves: Evolving Ecosystems Between Apple and Android?

Over the last week-end, we learnt that CVS and Rite-Aid decided to not support Apple Pay and also decided to actively disable NFC-readers installed in many of their stores. This showed key moves in the evolution of ecosystems around mobile payments. This is a follow-up to my previous one on Apple Pay.

Bloomberg BusinessWeek reported it as follows:

Rite Aid spokeswoman Ashley Flower defended the company in an e-mail to Bloomberg Businessweek. “We are continually evaluating various forms of mobile payment technologies, and are committed to offering convenient, reliable, and secure payment methods that meet the needs of our customers.”

In my view, it is more than actions of individual retailers. It is about poitioning in complex, evolving dynamic ecosystems.

Three Factors

One—Privacy. Apple has categorically said that they are not interested in consumer data. The retailers clearly want to develop a better profile of their consumers and their purchase habits. This itself is not new but the retailers have not been the benchmark for collecting and analyzing detailed consumer data over the lat decade. Now, with mobile app initiative, CurrentC, they hope to streamline the data collection.

Retailers want to support CurrentC as the Platform with QR Codes

Their system relies on QR Codes—arguably not as reliable as Apple Pay’s tokens. It is not as convenient and easy to use as Apple Pay’s Touch ID. It will be interesting to see independent consumer reports on the ease-of-use of these competing processes at the check-out counter in 2015 when it is finally launched.

Beyond convenience, the CurrentC initiative collects a lot of consumer data. TechCrunch provided details of the data elements that the retailers plan to collect from consumers.

TechCruch profiled the Data Collected by CurentC App
Data Collected by CurrentC and Third Parties

Two—Security. Retailers have not shown mastery over security. They could potentially invest in enhanced security and justify it based on superior data and insights that they gain from detailed customer transactions. They could work with companies such as IBM, Accenture and others to enhance their security levels to earn customer trust. It is a tall order and some retailers could use it to differentiate themselves. In the end, can they demonstrate thet their security is better than Apple Pay? That’s the question for the consumer in selecting one over the other.

Three—Monetization. We know that the retailers have been unhappy with the fees charged by financial institutions. The core value proposition of CurrentC initiative is direct link to checking accounts to eliminate the 2–3 percent fees. Apple reportedly gets a small fee in return for enhanced security. Will customers feel comfortable with direct link to their bank accounts data stored at the retailers? Since the consumers do not pay anything more for Apple Pay and still enjoy loyalty points from their credit cards, the monetization battle is fought behind-the-scenes away from the consumers.

Mobile Payment Ecosystem

On Monday, October 27, 2014 Tim Cook announced that Apple Pay has received over 1 million activations in the first 72 hours following its launch last week. In benchmarking this number, Tim Cook added that the mobile payments platform is bigger than all contactless competitors combined, presumably including rival service Google Wallet.

Apple is supported by a set of banking institutions, retailers and merchants as well as the payment networks such as Visa, MasterCard and American Express.

The competing ecosystems include the following: Softcard promoted by the telecom operators.

The founders of Softcard – AT&T Mobility, T-Mobile USA and Verizon Wireless – had a vision: use the power of the mobile phone to offer consumers a safer, simpler way to shop, pay and save.
Our company was created to bring this vision to life. We created a business of scale and convened a mobile commerce industry – establishing a platform that could connect the dots between merchants, banks, technology providers and brands to enhance the retail experience.
With Softcard, users can make payments at hundreds of thousands of merchant locations nationwide, even apply loyalty cards and redeem money-saving offers at select merchants. Softcard features state-of-the-art technology to enable contactless payments and helps protect user information by adding multiple layers of security such as PIN-protection, encryption and one call or click to remotely disable the app on a lost or stolen phone.

Then, there is CurrentC—masterminded by Wal-Mart and supported by many retailers—with varying degree of support to this initiative. It will not surprise me to see some of them accepting Apple Pay in the coming weeks.

And, there are others who have not yet shown their affinity. There’s Google Wallet that puts Android in play. There’s PayPal—positioned to be spun-off from eBay. There’s Samsung—a key player in the Android ecosystem. There’s Amazon—a key player in e-commerce. There are Twitter and Facebook—both with keen interest in digital commerce. Alibaba has supposedly shown interestt to work with Apple.

Is It Apple versus Android in the End?

Ultimately, one likely end game is that this becomes a competitive battle between Apple versus Android ecosystems. Banks and payment networks (Visa, MasterCard, Amex) could support both as some do already. Consumers will decide between Apple Pay versus Android Pay based on many considerations including convenience, privacy and security just as they do with their mobile devices. Telecom companies could ultimately morph their Softcard initiative into broader ecosystem moves by Apple and Google.

This could well be yet another ecosystem that is shaped by digital leaders such as Apple and Google.