Apple's (NASDAQ:AAPL) new mobile payment service, Apple Pay, has seen some initial success. But it is also seeing some significant resistance -- particularly from members of the Merchant Customer Exchange group, who have agreed to exclusively accept mobile wallet app CurrentC for mobile payments. Members of MCX include retail giants Wal-Mart (NYSE:WMT), Best Buy, and Target.
While the underlying technology for CurrentC and Apple Pay differ immensely, a difference in technological approaches to mobile payments probably isn't the issue for members in MCX with Apple Pay. The recent heated debate between the Wal-Mart executive Mike Cook and Visa executive Jim McCarthy suggests the key friction more likely lies in the consortium's attempt to move further away from the credit card fees that the Apple Pay system embraces.
Wal-Mart has a big agenda
Wal-mart's Michael Cook is "one of the biggest champions of MCX," Re/code author Jason Del Rey said. So, his thoughts are probably indicative of the broader agenda of MCX's decision to ban Apple Pay and be exclusive to CurrentC.
As Re/code notes, Cook's confrontation with a Visa executive at payments conference Money2020 makes the MCX backer's beef with credit card companies clear: Cook doesn't like the high level of control credit card companies have over pricing of merchant fees when a card is swiped.
Re/code author Jason Del Ray explains:
This exchange is noteworthy because it epitomizes the mistrust and disdain between Walmart and the credit card networks. Walmart is convinced that the fees merchants have to pay banks when a credit card is used in their stores is too high. And because the credit card networks are the entities that set the pricing framework for the fees, Walmart and other retailers blame them.
What does this have to do with Apple Pay? Apple's mobile pay system, unlike CurrentC, isn't trying to move consumers away from using their credit cards and, hence, help diminish the credit card fees merchants have to pay. But the CurrentC mobile pay system seems to have a broader agenda that emphasizes direct withdrawals from customer checking accounts and store credit -- two methods of payment that avoid merchant credit card fees.
While MCX has said that CurrentC will eventually accept traditional credit cards, MCX's agenda to reduce merchant credit card fee costs will likely always mean there are efforts to move consumers away from using their cards. Therefore, Apple's decision to embrace the credit card system and CurrentC's clear emphasis to move away from it in a search for lower transaction fees is where the two mobile pay systems really butt heads.
Del Ray adds to the story with an interesting scoop, saying that execs from MasterCard and Visa both indicated to him in an interview during the conference that neither major credit card will offer compatibility with CurrentC anytime soon. He even goes as far to say that Wal-Mart's agenda to diminish control of credit card companies is so serious that "Walmart will never accept Apple Pay, the service that the credit card networks support."
While the collective members of the MCX group have a formidable retail presence, Apple is probably better off with credit card companies on its side than fighting against them and trying to change a system that doesn't really need any improving from a technological standpoint.