CVS Follows Rite-Aid by Breaking Away from Apple Pay

CVS announced in February it would no longer sell tobacco products. (Photo: Joe Raedle, Getty Images)
(Photo: Joe Raedle, Getty Images)

Last Thursday drug store chain Rite Aid Inc. (RAD) reportedly stopped accepting payments made through the just launched Apple Pay system from Apple (AAPL). On Saturday, CVS Health (CVS) was reported to have followed suit at its CVS pharmacy stores.

The issue appears to be a conflict between Apple Pay and a mobile payment system called CurrentC that is being developed by a retailer-owned mobile technology outfit called Merchant Customer Exchange (MCX). Unlike Apple Pay, CurrentC does not use an NFC chip, but instead generates a QR code that is displayed on the merchant’s checkout terminal. Customers who have already linked their bank accounts to the CurrentC system scan the QR code from the terminal and the transaction is completed.

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

MCX has been working on a mobile payment solution since 2011, and the driving force behind the effort is to enable the merchants to avoid paying the 2% to 3% credit card transaction fees charged by the likes of Visa (V) and MasterCard (MA). How much do these big retailers dislike paying fees to Visa and MasterCard? Former Walmart CEO Lee Scott is reported to have said, “I don’t know that MCX will succeed, and I don’t care. As long as Visa suffers.”

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SOURCE: USA Today / 247 Wall St. – Paul Ausick