It may have taken seven years or so, but all the chickens seem to be coming home to roost on the “too big to fail” scandal. In case you didn’t notice at the time, because you were maybe in Afghanistan or ironing and starching your military-type cargo pants, this is where the big shots at the Fed felt they had no choice but to ride in like the cavalry and save all their ex-Ivy League fraternity brothers from wrack and ruin after the mortgage bubble burst like a behemoth eggy fart all over the world in 2008. Make no mistake, CEOs and bank executives have been hiding out, “cooking up second sets of ledgers and praying for the other shoe not to drop!” as the best-selling author Michael Lewis, author of Liar’s Poker put it in interview on the Charlie Rose Show on October 23, 2014. Now, seven years of good luck later, they’re back!
How come? Well, when Apple Pay was announced at a highly-choreographed September launch broadcast all over the world, financiers, tech industry analysts and pundits declared that the mobile payment system looked very likely to revolutionize the experimental ideal of the digital wallet. This concept of the digital wallet will, if it succeeds, make plastic credit and debit cards defunct as most shoppers’ way of making purchases.
Yet, now, only a week after Apple Pay’s launch, two major U.S. drug store chains, Rite Aid and CVS have reneged on a number of agreements, canceling their concordat with Apple Pay. Allied with Wal-Mart, Best Buy, Lowe’s, and Dunkin’ Donuts. As of Friday October 31, 2014, analysts are saying confidentially that this move is at the behest of the publicity-shy “too big to failures.” A bit of guerrilla warfare to keep Apple off balance by the really big banks, whose true bread-and-butter is the credit card industry. Meanwhile, the others, who have given themselves a group moniker, the Merchant Customer Exchange, or MCX, are hard at work forming new alliances with a number of banks including Credit Suisse, Goldman Sachs, Houlihan Lokey and others. Their offering, tentatively entitled CurrentC, is slated to roll out in 2015 at a claimed 110,000 locations.
CurrentC will have many advantages over Apple Pay for retailers. CurrentC money would be withdrawn directly from a consumer’s bank account rather than charging a credit card as Apple Pay does. As American society slowly becomes more and more cash free, the ’swipe fees’ credit card companies charge retailers are steadily increasing. This introduction of CurrentC would give retailers a huge profit bump as they would theoretically avoid paying any more swipe fees, according to the Washington Post. Additionally, every time a customer pays with a credit card, CurrentC would allow retailers access to their data about individual shoppers, allowing them to both hone and personalize their marketing and merchandising.
What happens next is anybody’s guess. Some of this has to do with major American banks’ having an aversion to Apple Pay‘s system, which like most European banks relies on NFC (Near-Field Communication) chips. These chips allow users to wave their smartphones in front of a reader and confirm the purchase with a fingerprint scan.
Then again, CurrentC will also end consumer ability to earn the rewards points they accumulate through credit and debit purchases. Predicting how the public will react to having such bonuses snatched away in the name of mutual parsimony is an intangible. Additionally, although Rite Aid and CVS are the torch carriers against the rise of Apple Pay, Apple still own a long list of partner retailers who are up for and enthusiastic about accepting this form of payment, including McDonald’s, Home Depot, Macy’s and Whole Foods Market.
Apple Pay is now available in some 220,000 store locations. Rite Aid has about 4,600 stores in the United States, while CVS has about 7,700, according to the Washington Post. Yet if Apple Pay succeeds, the Too-Big-to Failures of Current C may already be too late.