CVS and Rite Aid have disabled the near-field communications features on their cash registers to prevent customers from using Apple Pay as they promote a proprietary mobile payment program.
Less than a week after its public launch, Apple Pay has already managed to annoy several major retailers so much that they've disabled the service entirely.
Both CVS and Rite Aid, two drug store chains with thousands of locations in the United States, have disabled the near-field communications (NFC) readers at their cash registers to discourage customers from using Apple Pay.
This anti-consumer gesture was made because both companies are involved in a separate mobile payments initiative called the Merchant Customer Exchange (MCX). That program is meant to be an alternative to traditional credit card payment networks from Visa and Mastercard, and it involves a number of major retailers, including Walmart and Best Buy -- both of whom have, incidentally, publicly said that they do not have any plans to support Apple Pay.
The companies are attempting to form the MCX to reduce the amount of fees they pay to credit card networks by connecting themselves directly to consumers bank accounts for cheaper transfers of money, while offering shoppers additional loyalty discounts.
However, this does nothing more than annoy customers who would otherwise wish to give the chains money, and I suspect it's generally considered a bad business practice to make it more difficult for your customers to pay for their purchases.
Many customers are furious at both chains for their anti-consumer moves, as evidenced by a comment thread on a MacRumors article about the changes that totals more than 2,500 comments. The highest rated comments on the thread mostly focus on how some customers will choose to go to Walgreens instead, an Apple Pay launch partner.
Because Apple specifically designed Apple Pay to focus on making things better for the consumer (rather than making life better for the retailer, as MCX does by lowering fees), it will naturally be more popular and should drive other NFC payment platforms like Google Wallet to be used more as well.
Update: Apple has responded to this issue:
"The feedback we are getting from customers and retailers about Apple Pay is overwhelmingly positive and enthusiastic. We are working to get as many merchants as possible to support this convenient, secure, and private payment option for consumers. Many retailers have already seen the benefits and are delighting their customers at over 220,000 locations."
As I've written before, Apple has solved the chicken-and-egg problem with mobile payments by putting an easy-to-use NFC payment platform in the hands of millions of users. To make a payment with Apple Pay, customers merely wave their locked phone at a reader, scan their fingerprint, and they're done.
On the other hand, MCX requires customers to:
- Unlock their phone
- Open an app
- Generate or read a QR code to create a payment token
- Connect with the cloud for authorization
As Daring Fireball's John Gruber noted wryly, "QR codes. Good luck with that." It boggles the mind why the executives at CVS and Rite Aid thought that it would be a good idea to shut off customers from making payments with their phones when the NFC technology was already in place at their stores. Why bother spending money on NFC readers when you don't want to use them?
On the other hand, it shows how much of a draw Apple Pay is, because very few customers were using NFC readers before the launch of the payment network this past week.
Regardless, I predict that in a year or two, both chains (and Walmart and Best Buy) will see the error of their ways and move to adopt NFC payments from both Apple and Android, as just a week with Apple Pay has made clear that this is the future of retail payments. It may just take a while to get everyone on board.
Of course, it took decades for the credit card to catch on too, but I suspect we're in for a much quicker adoption cycle here.
What do you think? Are you less likely to shop at CVS and Rite Aid now? Let us know in the comments below.
Updated 7:55 p.m. Oct. 27 with Apple's comment about this issue.