Apple and Walmart are at war over in-store mobile payments, and it’s really exciting. Apple wants everyone to use Apple Pay, the new iPhone payments system. And Walmart — and a bunch of other companies — wants everyone to use CurrentC, a competing payments app.
Some of Walmart’s allies — Rite Aid and CVS — have sided with Walmart and disabled Apple Pay in their stores. Right now, more store chains have sided with CurrentC than have signed up for Apple Pay.
But the war didn’t need to happen, and it’s odd that Apple chose to fight Walmart et al., rather than offering them an incentive to get on board. That’s the key mystery to the conflict: Apple is trying to persuade retailers to adopt a system that retailers have no incentive to adopt.
Apple Pay literally doesn’t help you at all if you’re a retailer, except make it easier for people with iPhones to pay for something. Which is fine, except that it’s already easy for people with iPhones to pay for something — with cash or cards.
Apple Pay actually hurts retailers financially: It’s essentially a credit card payment app, and retailers hate credit cards because Visa and MasterCard take a cut of the fee when the payment is made. So Apple Pay will continue to hurt Walmart’s margins.
Apple Pay is a simple and elegant mobile payments solution: It hooks users’ credit cards to their phone, and uses the Touch ID fingerprint system to make payments in stores. The entire system replaces the actual credit cards with encrypted tokens, so even if the token is hacked it doesn’t give up the credit card behind it. Consumers, obviously, will find it useful.
CurrentC hooks users’ checking accounts to their phone, and lets them pay via an app at the checkout. It’s a little less elegant, but in the grand scheme of things many consumers will find it useful — especially as it automatically applies discounts and coupons to your purchase, which Apple Pay does not.
Everyone loves to hate Walmart. But just for the sake of argument, imagine you’re Walmart. You’re trying to develop an app that let’s people pay in your stores without incurring credit card fees, and you’re going to give your customers a pricing incentive to use it. If it catches on, you’ll get a bunch of consumer data from it too.
Then Apple comes along and says, Hey, we have a competing system. It doesn’t give you any incentive to use it. It actually hides customer data from you. It doesn’t offer your customers any discounts, either. And in the long run it hurts you because it strengthens Visa’s position in your business. CEO Tim Cook launched the product with a slide presentation touting the fact that it will conceal info that retailers previously gathered routinely, and rely upon for their marketing!
You can see why Walmart might not be enthusiastic.
Even if CurrentC fails, Apple Pay still offers Walmart nothing. Apple Pay could be hugely successful and Walmart might still not adopt it simply because unless a huge portion of their customer base shows up expressing annoyance at not being able to use Apple Pay, Walmart will still get its money. It will be a long time before a majority of customers leave the house without their wallets and purses.
So the strategic error here — or from Apple’s point of view, its daring gambit — is not offering the Walmart crew an incentive to get on board. That incentive could have been cheap, too. Apple could have let Walmart see some anonymized, aggregated data on purchases being made in Walmart via Apple Pay. It need not have infringed on customer privacy if it was hashed, encrypted and delivered in bulk.
Such data might actually have helped Walmart persuade more of its shoppers to use Apple Pay, and maybe Walmart could have given discounts to Apple Pay-ers.
Instead, we’ve got war. It’s more entertaining, sure. But it’s not at all clear that Apple will win this because there is no “losing” position for Walmart — the store will exist happily whether Apple Pay is popular or not.