There's currently a war lurking on the horizon in the mobile payments world. Of course, this war has technically been lurking for a long time, but two services in particular have emerged in recent weeks as high-profile combatants: Apple (NASDAQ:AAPL) Pay and CurrentC.
At the risk of sounding overzealous, I'm going to go ahead and predict that CurrentC has virtually no chance of succeeding against the Mac maker when it officially launches in 2015. There's exactly one reason CurrentC's odds are so slim.
CurrentC doesn't solve a consumer problem
At the heart of it, CurrentC wasn't conceived to solve any problem for the consumer. The service does not remove any friction during the actual retail payment process. In fact, it arguably introduces more, since it predominantly uses clunky QR codes that must be scanned. Most consumers would probably agree that swiping a card is faster and easier.
When Tim Cook introduced Apple Pay, he criticized all other services as primarily being "self-interested." For Google, that meant aggregating and analyzing data for targeting ads. But CurrentC is even worse. The primary purpose of CurrentC is to allow retailers to sidestep hefty credit card processing fees, which typically range from 2% to 3%. CurrentC hopes to do this by tapping directly into people's checking accounts.
The average consumer isn't typically overly concerned with saving the retailer a little bit of money. Quite the contrary, it should be the other way around. Sure, MCX (the consortium of retailers that created CurrentC) CEO Dekkers Davidson points to merchants that offer lower prices for cash transactions, implying that CurrentC will pass on cost savings and lead to lower prices, but retailers wouldn't be going to all of this trouble if they were simply breaking even.
The fundamental motivation behind creating CurrentC is not aligned with consumer interests, and that will be its downfall.
Could CurrentC be even worse for security breaches?
Another key feature of Apple Pay is security. While CurrentC also uses a tokenization system, that doesn't mean its back-end systems can't be compromised. In fact, they already have. Last month, the company disclosed a security breach that resulted in an undisclosed number of email addresses being stolen.
Fortunately, CurrentC is still in a private pilot, so its user base is currently relatively small, but the episode still doesn't inspire a lot of confidence in its security infrastructure. On the other hand, tech giants like Apple and Google basically never see actual intrusions on their network infrastructure. For example, the recent iCloud celebrity photo leak was the result of phishing, not the product of Apple's systems being directly compromised.
If you've ever been unlucky enough to have a credit card number compromised, then you know that all things considered, it's a fairly simple process to indicate which transactions may be fraudulent, and the card issuer will quickly issue you a new number and send you a new card. But what if it's your underlying checking account that gets compromised? Banks can still give you a new account number, but it's much more of a hassle.
It's clear Apple Pay is the better option for consumers -- they prefer a safer, more seamless payment process over saving retailers some money.
Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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