Is a mobile payments war coming to Europe?
Some US retailers are shutting out Apple Pay to spite credit card companies. Will we see such tactics in Europe?
The fight between incumbent interests and new technology is always an interesting one. We’ve seen it repeatedly as both government and existing taxi operators fight to prevent Über and its competitors getting foothold in their countries and cities, for example. It’s having to work hard to keep its service running in Berlin, against fierce resistance from the local authorities.
The latest pushback against new(ish) tech is US-only, as a group of retailers have shut down NFC payment in their stores, seemingly to stop the rise of Apple Pay.
The early signs are that Apple Pay is being ferociously successful – a technology that’s only available on the two latest iPhones and in the US only registered one million credit cards in the first 72 hours. Its mix of simplicity and security – essentially obscuring credit card details from the vendor – make it deeply appealing in a market who’s card security lags Europe by a margin.
Any yet, over the weekend stories began emerging of frustrated customers being told that it no longer worked in some stores:
CVS Pharmacy has decided to disable all NFC terminals in all of its stores after it was discovered that Apple Pay would work with the hardware. CVS sent a memo to its stores, which was posted by SlashGear, saying that Apple Pay was not a supported payment type and that customers would have to choose some other payment method in order to check out.
The reason? The stores in question have their own mobile payment solution coming called CurrentC. If Apple Pay gains traction, it’s likely to undermine their own efforts.
Pay via QR code
TechCrunch has a detailed explanation of the CurrentC service:
Rather than NFC, CurrentC uses QR codes displayed on a cashier’s screen and scanned by the consumer’s phone or vice versa to initiate and verify the transaction. The system is also designed to automatically apply discounts, use loyalty programs, and charge purchases to a variety of payment methods without passing sensitive financial data to the merchant.
The system is best summed up by this image:
Dave Mark makes this comparison on The Loop:
With Apple Pay, you place your phone near an NFC sensor, then touch TouchID to validate the purchase. With CurrentC, you first have to unlock your phone, launch the CurrentC app, wait for it to generate a QR code which you place in front of the scanner. You then enter a pin code to complete the process.
It has the card obfuscation benefits of Apple Pay – but not the simplicity – nor the support for credit cards. And that’s by design, as TechCrunch points out:
The idea behind MCX was that if enough retailers teamed up, they could convince consumers to adopt their mobile payment system that would let retailers avoid paying credit card fees in the 2 percent to 3 percent range by processing payments through Automatic Clearing House transactions through bank accounts that have much smaller fees. MCX’s app could also help retailers by encouraging loyalty to participating merchants and possibly provide them additional intelligence on their customers.
Defending the incumbent against innovation
And so we find ourselves in the situation where two systems that both have the potential to benefit the consumer are being cast as competition – so that retailers can improve their margins. Now, business is business. But when you start making customer-hostile decisions to support your business goals, you’re treading a difficult path. The US retailers want to hurt the credit card companies – and they’re willing to inconvenience customers to do that.
The same could be said for the push-back against Über. Berlin has raised some concerns about safety, but it is difficult to separate those concerns from the incumbent taxi’s industry’s campaign against a service that is proving very popular with users. And for periods this year, Über fans in Berlin have not been able to legally use the service. How will this conflict play out in the mobile payments space?
We already have widespread use of NFC-based payments in Europe. Apple Pay has yet to be even announced here – but it seems inevitable that more payments will shift towards the mobile of whatever flavour you chose. Will Europe embrace that shift – or find excuses to keep the current systems in play?