Apple Pay: Why some retailers have ditched it after one week

Apple Pay was released a week ago, and it is catching on quick. But some major retailers, such as Walmart, CVS, and Rite Aid, have chosen to reject Apple Pay in favor of other mobile payment systems.

Marcio Jose Sanchez/AP/File
Apple CEO Tim Cook introduces Apple Pay during an event in Cupertino, Calif. on Sept. 9.

It has been a good few months for Apple. The company sold record numbers of its new generation of iPhones. It announced a new line of iPads. But the hottest Apple debut right now is Apple Pay.  

Apple Pay was launched on Oct. 20, and within three days, 1 million credit cards were already activated, said Tim Cook, Apple's chief executive, at a tech conference in Laguna Beach, Calif. He said more people are using Apple Pay than all of the other mobile payment systems combined.

Apple Pay is a mobile payment system. Using an iPhone 6 or 6 Plus, customers enter credit card information and then use their phones to make payments at stores. Apple Pay is already accepted at 220,000 store locations, including Whole Foods, Walgreens, McDonald's, Macy's, and Nike, and more retailers are expected to join. 

"It's sort of that 'ahh' moment — you use the phone and it's all you have to do," Mr. Cook said at the conference, according to The Verge.

Apple hasn't released further data on Apple Pay, but on the product's first day, Avin Arumugam, digital executive director for Chase bank told Bloomberg that seven times more people connected their credit card to Apple Pay than signed up for a new credit card.

If Apple Pay continues to gain popularity with customers and retailers, more users could switch to an iPhone, and the mobile payment market could go from $12.8 billion in 2012 to $90 billion in 2017, according to Forester Research. 

Other companies have tried unsuccessfully to enter the mobile pay market. Google, PayPal, Verizon, and AT&T have all tried to get customers to pay for goods with their phones, but the systems never gained popularity. With Apple's initial success, many believe Apple Pay could become the most widely used mobile payment system. 

“Apple actually has a really good shot at being successful here because they’ve solved a lot of fundamental issues that others haven’t in the past," Patrick Moorhead, president of Moor Insights & Strategy, told The New York Times. "In particular, the user experience issue. It’s simple, easy, and secure to use.”

Though Apple Pay is popular with customers, some businesses have rejected the technology. Merchant Customer Exchange (MCX), merchant-owned mobile payment company, has chosen not to use Apple's system. Over the weekend, CVS and Rite Aid, both MCX members, disabled Apple Pay from all of their stores. The move also disables Google Wallet and Softcard because they use the same wireless technology. Market analysts said that CVS and Rite Aid's decision to disable Apple Pay was a move in favor of their own system. 

MCX is working on mobile payment software, called CurrentC, to use at its stores. The group says CurrentC will be linked to a consumer’s debit account. Since the system doesn't use credit cards, retailers won't pay fees per transaction. But the system isn't fully developed yet. 

Spokespeople for CVS and Rite Aid told CNN that they are still "evaluating mobile payment options."

Best Buy and Walmart are both MCX members and they have chosen never to accept Apple Pay. 

In a statement to Business Insider a Walmart spokesperson wrote:

There are certainly a lot of compelling technologies being developed, which is great for the mobile-commerce industry as a whole. Ultimately, what matters is that consumers have a payment option that is widely accepted, secure, and developed with their best interests in mind. MCX member merchants already collectively serve a majority of Americans every day. MCX’s members believe merchants are in the best position to provide a mobile solution because of their deep insights into their customers’ shopping and buying experiences.

“Clearly Rite Aid and CVS are making a business decision over a customer satisfaction decision,” Mr. Moorhead told the Times.

At the conference on Monday, Cook answered a question about retailers who are reluctant to use Apple Pay: “In the long arc of time, you’re only relevant as a retailer and merchant if your customers love you."

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