Never one to mince words, Bob Carr, chief executive of the big merchant acquirer Heartland Payment Systems Inc., predicts that demand for Apple Inc.’s new Apple Pay mobile-payment service will force the retailer-controlled Merchant Customer Exchange (MCX) to abandon a policy of requiring its members to accept only MCX’s CurrentC mobile wallet.
“MCX has this idea it’s us or nobody, you have to swear that you’re not going to use any other alternative-payment system,” Carr said Wednesday at the Mobile Payments Conference—Mobilizing Retail event in Skokie, Ill. “I don’t see how that survives. I think Apple Pay sort of kills that entire concept, because consumers will pay with what they want to pay, and with the device they want to pay. We learned that a long time ago.”
Apple Pay is expected to go live this month on Apple’s new iPhone 6 and iPhone 6 Plus, and on the coming Apple Watch next year. The service includes near-field communication (NFC) technology for fast, contactless payments at the point of sale and Apple’s Touch ID fingerprint biometrics for added security.
While critics have identified what they see as flaws in the much-hyped Apple Pay—it doesn’t have a loyalty component and isn’t available for smart phones running Google Inc.’s market-leading Android operating system, for example—the service seems likely to attain critical mass quickly. Apple sold 10 million iPhone 6 phones in the first weekend the device was available, and it has 800 million accounts with its iTunes service. The payment cards consumers use to fund iTunes purchases can be easily enrolled for use with Apple Pay, and others can be added to Apple’s Passbook app when the iPhone user snaps pictures of them with the device’s camera.
Carr, who said MCX also bars members from using PayPal Inc., which is trying to establish its online-based service in physical stores, believes MCX will be hard-pressed to retain its exclusivity policy in the face of the anticipated demand by potentially millions of consumers to use Apple Pay in its members’ stores. “PayPal is a competitor to MCX, Apple Pay is a competitor to MCX,” he said. “Is MCX going to be able to really get away with $1 trillion of the economy being excluded from PayPal and Apple Pay? I don’t think so, I don’t think it’s going to fly.”
Carr added that MCX may have a hard time selling small merchants on mobile-wallet exclusivity as it tries to move beyond its large-retailer base. He reiterated his anti-exclusivity point in a brief interview with Digital Transactions News after his speech. “I think Apple Pay put the nail in that coffin,” he said.
An MCX spokesperson did not immediately respond to a Digital Transactions News request for comment. MCX claims dozens of national and regional merchants representing $1 trillion in annual payments as members. They include Wal-Mart Stores, Target (which will accept Apple Pay in the Target app but not in its stores), Dunkin’ Donuts (which has a closed-loop mobile-pay service), Southwest Airlines, Kohl’s and other department stores, and several grocery and convenience-store chains. Merchant customers of Princeton, N.J.-based Heartland that are MCX members include 7-Eleven and petroleum retailer Phillips 66.
Carr touched on several other topics related to mobile and online payments and payment security in his speech. He said merchants want to implement mobile payments, but they are beginning to question services that he believes stand between them and customers. In the restaurant sector, where Heartland has a big presence, Carr cited as examples such services as GrubHub and OpenTable that make online ordering or reservations easy, but have the customer interacting with the service provider. Specialty providers also can deliver offers from a merchant’s competitors. “Merchants are really tired of the disintermediation that lots of [these] solutions are bringing to them,” Carr said.