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Here's why Rite Aid and CVS turned off Apple Pay

Matt Hamblen | Oct. 28, 2014
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.

"Many of these merchants have been pushing back on swipe fees for years and feel their concerns have not been answered by the bank issuers and credit card networks," McKee said. "They see the transition to mobile payments as the opportune time to equal the score."

He argued that the MCX approach to keep its merchants locked to CurrentC by turning off NFC terminals is "undoubtedly misguided" and is a "scorched earth approach that attempts to stifle the competition. It's a classic case of businesses acting on their own self-interests while completely disregarding the consumer.

"Inevitably, these merchants will realize that limiting consumer choice at the point of sale is a significant misstep," he said. "MCX must understand that consumers are like water; you can try to constrain them, but they'll inevitably do what they want and cause damage along the way."

Litan was more sympathetic to the plight of retailers: "I'm on the side of free competition and a big believer that there's not a fair playfield, since Visa, MasterCard and American Express have a virtual monopoly with over 80% of the market — which is the definition of a monopoly.

"Walmart and Best Buy and others don't want Apple Pay because it just promotes the Visa and MasterCard payments approach and the retailers are just exhausted at having to pay these high rates," Litan said.

In the 2003 case, the large retailers had argued that Visa and MasterCard violated antitrust laws by forcing merchants to accept their debit cards if they wanted to accept their credit cards. Visa and MasterCard agreed to no longer require merchants to accept both types of cards and in addition to making the $3 billion settlement, the card networks lowered the fees they charged merchants for debit card transactions.

Though the MCX opposition to NFC payments could slow the adoption of mobile payments in the U.S., Litan took the other view.

"This battle will accelerate mobile payments and cause it to roll out faster because of the competition from Apple Pay," Litan said. "MCX has taken forever to roll out CurrentC and they should get off their duff. The question is whether they really are competitive, but they haven't done squat and have just been talking it about for years."

 

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