2 drug chains disable Apple Pay, as a rival makes plans

Apple Pay, the Silicon Valley giant’s highly anticipated mobile wallet, has been available for only one week but already may be inciting a battle within the payments industry.

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Over the weekend, Rite Aid and CVS disabled Apple Pay from working in their stores nationwide. The reason was not immediately clear.

Ashley Flower, a spokeswoman for Rite Aid, said the company “does not currently accept Apple Pay.” She added that Rite Aid was “still in the process of evaluating our mobile payment options.”

Representatives from CVS did not respond to repeated telephone and e-mail requests for comment Sunday.

Analysts said disabling acceptance of Apple Pay was a way to favor a rival system that is not yet available but is being developed by a consortium of merchants known as Merchant Customer Exchange, or MCX. Rite Aid and CVS are part of that consortium, not part of the group of retailers that had teamed up with Apple on its payment system. Nonetheless, last week, Apple Pay technology was working in Rite Aid and CVS stores.

“Clearly Rite Aid and CVS are making a business decision over a customer satisfaction decision,” said Patrick Moorhead, president of Moor Insights & Strategy. He said that the move could upset consumers who believe Apple’s new product is easier and safer than paying with a traditional credit card.

Apple declined to comment on the stores’ action. An executive at MasterCard, which has teamed with Apple on its new system, said Rite Aid and CVS made the wrong decision. “We think consumers should have the ability to pay any way they want,” said Ed McLaughlin, chief emerging payments officer at MasterCard.

Apple has not released data on how popular its new product is. But on Apple Pay’s first day, at Chase banking services seven times more people added Chase credit cards to Apple Pay than signed up for new credit cards, Avin Arumugam, Chase’s digital executive director, said in an interview with Bloomberg.

A great deal is at stake. MCX’s payments system helps merchants keep track of customer shopping habits across the dozens of merchants who plan to accept the payment product. That is a potential treasure trove of data for retailers, who wish to better target consumers with deals and loyalty programs.

This also gives retailers the potential ability to cut credit card companies out of the payments process entirely. MCX’s system, CurrentC, will be linked to a consumer’s debit account, according to the company’s description of the product. By bypassing credit card companies, MCX merchants could potentially save money on the fees they pay per transaction.

The battle will surely escalate in the coming months as companies like PayPal and Google update their mobile wallet strategy to deal with the fast-changing market. But for now, many are betting on Apple Pay as the mobile wallet to beat.

“Apple Pay is the most convenient, most secure, and what’s best for consumers,” McLaughlin of MasterCard said. “That’s what will win out in the end.”

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