Recent moves by Rite Aid and CVS to stop taking mobile payments from Apple Pay and other NFC-enabled systems stem from a protracted battle between major U.S. retailers and Visa and MasterCard.
The battle goes back to at least 1996, when Walmart, Sears and other big retailers filed a class-action lawsuit arguing that Visa and MasterCard violated antitrust laws. The credit card companies ultimately agreed to pay the retailers $3 billion to settle the suit in 2003.
In the current skirmish, the issue is over retailers paying 2% or more in fees, better known as "swipe fees," to credit card companies for customers to use Apple Pay or other systems that rely on major credit cards.
"Retailers and credit card companies have been going to war for years [over the fees retailers pay], but this latest battle will be fought more vigorously," said Gartner analyst Avivah Litan in an interview. "Consumers all want to pay with Apple Pay and love it and that's why this is headed to a huge conflict that will eventually play out in the courtroom."
While other analysts downplayed the prospects of a legal fight between credit card companies and retailers, they agreed that the dispute is contentious and the stakes are enormous.
What's clear is that consumers aren't getting the consideration they deserve by having access to a more widespread system for secure mobile payments through Apple Pay.
Both Rite Aid and CVS are members of Merchant Customer Exchange, which is made up of 58 of the nation's largest retailers, including Walmart, Sears and Best Buy. MCX launched a mobile payment network called CurrentC in September (download PDF) that competes with Apple Pay, Google Wallet and others that rely on a Near Field Communication chip inside a smartphone.
CurrentC technology relies on QR codes in a smartphone app to communicate with retailers via more conventional in-store payment terminals using QR code readers instead of NFC-ready terminals. The CurrentC app will be free in Apple's App Store and in Google Play sometime in 2015.
MCX argued that CurrentC will be honored in 110,000 merchant locations when available and that customers will get to pay using a variety of financial accounts, including a checking account, merchant gift card or "select" merchant-branded credit or debit account. Apple Pay requires users to back payments from a number of large banks that use Visa, MasterCard or American Express.
MCX also said that CurrentC will be a more secure way to pay because it stores sensitive user information in its cloud vault and not on a phone. Apple Pay has been called the most secure mobile payment services launched to date: it is backed by token security — a secure element chip inside a device and the Touch ID fingerprint scanner on the latest iPhone 6 and iPhone 6 Plus. Apple plans to expand the system to other devices in the future.
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