For Apple (NASDAQ: AAPL) Pay to succeed, the company needs a large percentage of retailers to support the mobile payment technology.
It does not matter how excellent Apple makes the app or how many of its customers want to use it. If stores don't sign up, acquire the necessary technology, and train their staffs to use the system, Apple Pay will die an ugly death.
Currently, Apple is only competing with other technology companies in the mobile payments space, with Google and Samsung being the two biggest. That could change if CurrentC, which is backed by a number of major retailers, gets off the ground.
What is CurrentC?
CurrentC has yet to launch, and its very limited website provides few details as to its exact makeup. The payment system is expected to launch soon and is likely to pair retail checkout via mobile device with a loyalty program, reported CIO.com.
To use CurrentC, a user points his or her phone's camera at a "one-time barcode displayed on a retailer terminal to trigger payment," according to the website. "The payment takes place using a previously registered bank account, so no payment information is exchanged or transmitted in stores."
The company did lay out the system's basic structure in a graphic on its website:
The system generally seems to be an alternative mobile payment system that accomplishes the same thing as Apple Pay, using a slightly less convenient technology while offering some retail perks Apple cannot. There are a few differences as Apple uses credit cards while CurrentC processes payment from checking accounts.
It's not the existence of another competitor that should concern the iPhone maker, but rather the roster of retailers that are already on board with CurrentC.
CurrentC has some big supporters
CurrentC's retail partners remove a number of major players from the cast of companies that might back Apple Pay. The new payment technology has been tested in a number of markets around the U.S., according to CIO. "However, its use is restricted to employees of member retailers, which include Walmart, 7-Eleven, Dunkin Donuts, Sears, Best Buy, ExxonMobil and Gap."
Merchant Customer Exchange, the parent company of CurrentC, also includes Target, Lowe's, and a number of other major and midsize retail and restaurant chains as partners.
Take those retailers out of the mix for Apple and establishing Apple Pay becomes that much harder. Add in the fact that Apple Pay only works inside the Starbucks app to reload your card -- rather than directly at Starbucks registers -- and you can already see the road becoming harder for Apple.
In addition, CIO reported that another two major retail chains have forgone Apple's service because of their relationship with CurrentC.
CurrentC got a higher profile in October last year when pharmacy chains CVS and Rite Aid, both MCX members, stopped accepting Apple Pay a week after it launched. At the time it was widely interpreted as an attempt to block the rival service while CurrentC was getting off the ground.
There's nothing about being an MCX member that forbids also offering Apple Pay, but supporting multiple mobile platforms presents a new set of challenges. Training retail employees on one new payment system is not a simple process and offering two new systems would add to the challenge. The two products also use different technology which can add to implementation costs.
CurrentC also has the massive advantage of allowing member stores to avoid credit/debit card fees. That gives them a big incentive to promote CurrentC and not Apple Pay.
What happens next?
CurrentC has the ability to freeze Apple out of its stores, but Apple also has a huge, vocal user base that could decide it wants to shop at stores like Whole Foods that offer Apple Pay as opposed to Publix, a supermarket chain and MCX member.
In some ways it's a bit of a race -- Apple has to lock up as many non-MCX stores as it can to entice its user base to actually use Apple Pay. If the company can get iPhone owners in the habit of using the technology, they may push stores into begrudgingly adding it.
CurrentC also has a limited window to actually bring its product to market and convince people to use it. Tying payment in with a loyalty program has certainly worked for Starbucks, and it could help MCX establish its payment platform.
It's hard to know who will win this battle as CurrentC has not launched yet and Apple Pay is still in its early days. Having a competitor with so many strong retail partners could present a real hurdle for Apple, especially if the company cannot build a lead in the space faster than it has thus far.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Daniel Kline owns shares of Apple. He has never used Apple Pay but has it enabled on his iPhone. The Motley Fool recommends Apple, CVS Health, Google (A shares), Google (C shares), Starbucks, and Whole Foods Market. The Motley Fool owns shares of Apple, ExxonMobil, Google (A shares), Google (C shares), Starbucks, and Whole Foods Market. 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.