Drug store Rite Aid stops accepting payments through Apple Pay

Drug store chain Rite Aid Inc last week reportedly stopped accepting payments made through the newly-launched Apple Pay system from Apple, USA Today reported. On Saturday, CVS Health reportedly followed suit at its CVS pharmacy stores.

According to commentators, the issue appeared to be a conflict between Apple Pay and a mobile payment system called CurrentC under development by a retailer-owned mobile technology outfit called Merchant Customer Exchange (MCX).

Unlike Apple Pay, CurrentC does not use an NFC chip, but generates a QR code that displays on the merchant's checkout terminal.

Customers who had already linked their bank accounts to the CurrentC system, were required to scan the QR code from the terminal to complete the transaction.

When Apple announced Apple Pay in early September, both Wal-Mart Stores and Best Buy said they had no plans to adopt the new system. Both were partners in MCX along with other major retailers like Target, Darden Restaurants, and Sears Holdings.

MCX had been working on a mobile payment solution since 2011, and the driving force behind the effort was to enable the merchants to avoid paying the 2 per cent to 3 per cent credit card transaction fees charged by the likes of Visa and MasterCard.

That big retailers resented paying transaction fees to Visa and MasterCard was known and former Walmart CEO Lee Scott had reportedly said he did not know whether MCX would succeed, and did not care as long as Visa suffered.

Meanwhile, The New York Times quoted Ashley Flower, a spokeswoman for Rite Aid, as saying the company did not currently accept Apple Pay, adding that Rite Aid was ''still in the process of evaluating our mobile payment options.''

According to analysts, disabling acceptance of Apple Pay was a way to favour a rival system that was not yet available but was being developed. Rite Aid and CVS form part of the consortium; they are not part of the group of retailers that had teamed up with Apple on its payment system. Nevertheless last week, Apple Pay technology was working in Rite Aid and CVS stores.

According to Patrick Moorhead, president of Moor Insights & Strategy, clearly Rite Aid and CVS were making a business decision over a customer satisfaction decision.

He added, the move could upset consumers who believed Apple's new product was easier and safer than paying with a traditional credit card.