Nov 14

CurrentC vs. Apple Pay: the battle of greed vs. convenience

From the Pathetic Excuse Dept: You may have noticed that my normally sporadic posts have become increasingly sporadic. There is actually a reason. I’m in the final stages of a new book, and the manuscript deadline fast approaching. So it’s all-hands-on-deck time, and I only have two. Hope you’ll stick with me. And I hope you’ll like the result, coming spring 2015.

The more I read about the CurrentC consortium and its challenge to Apple Pay, the more I scratch my head.

Most critics of CurrentC (and there are plenty) are slamming it because of its technology, security or ease of use. However, what I find most disturbing is the obvious motivation for CurrentC — and the obvious end result if the consortium should realize their dreams.

The bottom line is that people can tell whether a company is acting in the customers’ interest or its own self-interest. Which isn’t good news for CurrentC.

Clearly, it all started when a light bulb went off in these retailers’ heads: “Why give credit card companies a cut of every sale? All combined, we’re giving those guys billions of dollars!”

By creating CurrentC, they would not only save truckloads of cash, they would gain new insights into customers’ buying habits, allowing them to shower people with targeted sales and coupons. Life would be sweet.

Of course, CurrentC is presented in a way that would have us believe it’s all to make our lives easier. But nothing could be further from the truth. In fact, there is precious little about CurrentC that makes life easier for customers. It’s designed to benefit the retailers.

It requires more effort than Apple Pay, it latches directly onto our bank accounts, it requires us to surrender our social security numbers and it bypasses the fraud protection that comes with credit cards.

The retailers will profit in a huge way by no longer having to pay a percentage of their sales to the credit card companies. But — does anyone on earth believe they will pass those savings on to their customers?

Yeah, right.

CurrentC isn’t a savings plan for customers — it’s a new profit center for retailers, with a candy-colored shell to help it go down smoother.

But wait, you say! How can I possibly slam retailers for padding their bottom lines with CurrentC when I’m okay with Apple adding billions in profits via Apple Pay?

It’s easy.

In this world, one earns a profit by providing a valuable service. Apple Pay makes in-store purchases totally simple, and it doesn’t cost customers a dime. It’s the credit card companies who will foot the bill, because Apple Pay reduces fraud and makes it easier for customers to use their cards. So everyone wins. Customers get a better experience, credit cards become more convenient and Apple makes a profit for making it all possible.

I don’t know about you, but I’m going to enjoy watching this battle. Greed has always been a powerful force in our world. I think convenience is going to whoop its butt.

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  • dr.no

    It is a negotiating tactic by Walmart to get VISA to
    give lower fees for CNP (Card Not Present).
    CurrentC also wants to support credit card.
    They are using ApplePay as hostage.

    When you pay with ApplePay at Retail POS fees are Card Present.
    Currently when you pay from an app fees are CNP even though
    same mechanism is being used and only one extra step going thru Apple
    to do the transaction, VISA is not giving a discount.

    CurrentC wants CP fees for their mechanism too. That is the battle.

    Retailers have also spend hundreds of millions of dollars to track
    their customer’s purchase intent.
    As an ad man you should know the value of that.

  • Mel Gross

    But a big question is whether we, as customers, should want retailers to track that information. Right now, and even with apple pay, they know we’ve purchased something. I don’t see why it’s any of their business. The fact that they want this information doesn’t mean that I should be giving it to them. And I was in the advertising business for a number of years too.

  • SDR97

    I’m pro-Apple Pay and anti-CurrentC, for all the reasons you state, and even the reason you don’t care much about — the ease of use. That said, I’m struggling to understand the logic that the savings of retailers with CurrentC won’t get passed on to consumers, but the cost of Apple Pay won’t get passed on, either. I don’t suppose the credit card companies are in this racket for our health, either.

  • Jay

    It seems simple to me from a consumer standpoint that Apple Pay is far superior. Your credit card is totally protected, the retailer has no access to the card or any personal information therefor they cannot flood you with advertising and the neither Apple nor retailer has access to your credit card or any other personal information

  • Jared Porter

    Apple’s “fee” to Visa, MC, and AmEx is only 15 cents per $100 purchased! This “fee” is definitely worth it to the credit card companies because they realize the transaction was authenticated through the iPhone’s “failproof” fingerprint verification.

  • CraigNotGreg

    Well, of course a merchant has to know you’ve purchased something. They are selling you the item or service. With Apple Pay, the merchants get no customer information unless you opt-in to one of their rewards programs or use it through a custom app. For point of sale purchases, the merchants get nothing.

  • dr.no

    credit card companies still make you sign
    the receipt if the purchase is over $50.
    So Target can still track you.
    It is said Target can track you even if you delete their app
    because they are storing their customer_id in Keychains
    which Apple has done nothing about. Not can you see it.

  • jamesdbailey

    Just sign with a more or less straight line. Since they don’t have a credit card to compare against, what good will the signature do for them? They get no personal information from a signature if you are reasonably clever.

  • FlyingJoe

    Something I don’t get in all this talk of retailers only avoiding credit card fees with CurrentC but no chance of it with Apple Pay, is that I read once that Apple Pay also works with debit cards. If that is true, then couldn’t Walmart and fellow CurrenC member companies save those ‘nasty’ credit card fees by embracing Apple Pay and encouraging (rewarding) clients to use those debit card numbers instead?

    What am I missing, since this is never suggested? Clearly there’s some kind of problem with my idea… because if that can work, then it isn’t really about the fees, It’s about the client data then. I could give them some credit (pun intended) if to retain more of their profit, but they lose all moral high ground if they want to use their clients’ information…

  • Jon

    There is always self-interest at play in any transaction. The sale wants more money for less product, and the customer wants more product for less money. Profits are not bad, nor is maximizing profits. However, there is a certain point–a sweet spot, where the two come together, and a sale is made. Also, if a company can achieve its self-interest by fulfilling the self-interest of the company, there are potentially huge gains to be made. Apple is a pro at this. You complained in your post that the CurrentC consortium wouldn’t pass on their savings, but Apple has huge margins–much, much higher than these retailers. A few pennies makes more difference to them than it does for Apple, yet you are not complaining in this post about Apple’s “not passing on savings” to the customer. The reason is simple, that is because Apple, with its margins is also meeting the customer’s self-interest needs.

    In other words, if CurC could also do the same thing–meet the consumer’s self-interest at the same time, then there wouldn’t be this backlash. Unfortunately, these companies don’t know how to do that, other than—bottom-line prices. But that just undermines everything else they may try to do.

    IMO, there is room here for Apple to find a way to also meet the self-interest needs of these stores–though not necessarily in a way they are looking at right now–and bring them on board. As it is, however, the only stores interested are those that also already have higher margins than the Walmart crowd…

    Answers? Solutions? I don’t know, but def. there will be attrition here. I wonder if this whole issue will spell disaster for Walmart, and other stores that are pushing to the bottom. I’ve never really understood the consumer race to the bottom. It’s like jumping out of an airplane, and seeing who can hit the ground first. Sooner or later, someone is just going to not deploy his parachute in order to win. Only they forgot what that results in…

  • ksegall

    I agree with you that if the CurrentC retailers offered some real value, they wouldn’t have such an uphill battle ahead. But they don’t, and that’s the point of my article. They’re asking the customer to give up a few things, just so they can make more money.

    When it comes to discussions about profits and “passing on savings” to customers, I really wouldn’t mention Apple and the retailers in the same breath. The value delivered by the two are of two different worlds. The effort that goes into engineering and designing a product like iPhone or iPad is extraordinary, and the value people get from such things is off the charts.

    Retailers are the middlemen in the consumer transaction, and they compete with each other on price, so their margins are significantly lower. But they can and (some) do bring value to the customer — by creating a great shopping experience. How they do that is up to them, and that’s what defines their own brand. It might be a gorgeous store, amazing customer service, great prices, or a combination thereof.

    When retailers price their offerings, they have to consider many factors: real estate, wages, the competition’s prices, and yes, credit card fees.

    It’s not like credit card fees are some new invention. They’ve been a part of retail selling since the dawn of time. If a retailer feels so encumbered by these fees, it could charge a its own fee for credit card purchases. (Like my local gas stations do, damn them.) However, that’s a tough sell, because credit card fees are already factored into retail pricing.

    Which brings us back to your excellent points. If CurrentC offered some new value to customers, we wouldn’t be having this debate. But it doesn’t. The convenience of paying by phone does not balance out the negative of the retailer latching onto your bank account and you giving up the protection of credit card companies. The added value is purely for the retailers.

    What’s great about Apple Pay is that it does add value. It’s added convenience with zero negatives.

    Like you, I don’t see a good solution for the retailers. Maybe it’s a dream, but they might take a cue from Apple instead of griping about them. Give people a terrific experience, and they might be willing to pay a little more.

  • One question: is there anything keeping Apple from waiting until their Apple Pay solution becomes sufficiently accepted at most retailers, and then releasing their own virtual iPhone-only “credit card”? Seems like, since they make the bulk of their money from hardware sales, they could pass most of the fees they earn from retailers (~2%?) on to the customers, effectively giving their customers a 2% discount on every purchase?

    Or is there some kind of law keeping credit card companies from passing the money earned from retail fees onto their customers?

  • AAPL_@_$101_Is_A_Done_Deal_:)

    Although I’m pro-Apple Pay, I think the retailers should give consumers a choice of which payment method they’d like to use. MCX simply disallowing Apple Pay seems a bit unfair to consumers. MCX flipped a switch and said no to Apple Pay even though their terminals could handle it. That’s what I don’t like. They’re taking away the consumer’s rights for their own selfish reasons. Let MCX use CurrentC but give the consumers back the choice to use one or the other.

    That’s an awful lot of stores where consumers can’t use Apple Pay so it’s hindering the increase of more secure payments in a time when consumers can ill afford to get their identity stolen from the theft of credit card numbers and data that goes along with it. MCX shouldn’t be able to say they’re waiting for CurrentC to be ready is in the best interest of the consumer.

  • qka

    Belonging to the school of thought “I’ll gladly pay you Tuesday for a hamburger today” school of thought, CurrentC is a nonstarter. There are many other reasons why I use my credit card, and not my debit card for purchases.

  • ksegall

    Thank you for using that expression! It’s one of my faves. Even if the number of people who understand its origin diminishes from year to year…

  • Samanjj

    At works with debit cards and credit cards as long as the card issuer sets it up and the merchant can accept Contactless

  • Samanjj

    Also it is just carving a slice of the same cherry. The fee overall to the merchant is unchanged.