The launch of Apple Pay (AAPL) had already turned into a mess for CurrentC, a rival payment network backed by Wal-Mart Stores (WMT) and other retailers—and that was before hackers gained access to the e-mail addresses of CurrentC’s pilot users.
Linda Walsh, a spokeswoman for MCX, the company building the CurrenC system, tried to play down the problem. “Many of these e-mail addresses are dummy accounts used for testing purposes only,” she said in an e-mail. “The CurrentC app itself was not affected.” MCX has contacted the users involved in the breach and pledges to investigate further.
From a publicity standpoint, a data breach is one of the worst things that could happen to CurrentC right now. The app exists only in a private testing mode, but its plans call for a public launch sometime next year. Since CurrenC bypasses credit cards, the system will ask millions of shoppers to upload sensitive banking information to its servers. Users will also be asked to embrace features that allow CurrenC to track their physical location, information about their transactions, and other data. MCX’s privacy policy says it may make commercial deals to acquire personal data from third parties, combining that with data it is gathering on its own to build its service.
All this stands in contrast to Apple Pay, which makes a selling point of its inability to collect information about transactions. It’s a limitation that irks even some of its supporters. Apple also uses a technique called tokenization: temporary codes, rather than credit card numbers, are used to process payments, which can’t go through unless a user also scans a thumb with an iPhone fingerprint reader.
The CurrenC hack comes on the heels of another publicity snafu. Within days of Apple Pay’s launch, CVS Health (CVS) and Rite Aid (RAD) stopped accepting Apple Pay transactions. This, of course, didn’t play well with those customers already enjoying Apple Pay. MCX has confirmed that it bars its members from accepting other forms of mobile payments. This may have seemed like a savvy way to discourage competition, but it’s tough to explain to customers why it serves them.
Everyone involved in CurrenC has been trying to keep a low profile. Competitors don’t want to make that easy, though. Walgreens (WAG), a launch partner of Apple Pay, began running an advertising campaign on Twitter (TWTR) reminding people that it will let them pay however they want.
“We’re using innovation choice to increase loyalty to Walgreens,” says Deepika Pandey, who heads the company’s digital marketing. She says that payments using near-field communication, the technology behind Apple Pay and other smartphone wallets, have doubled since Apple Pay’s launch last week.
It’s not a coincidence that the front line in the fight between Apple and MCX is taking place in drugstores. Mobile payments are still unproven, and the companies backing them need to get people accustomed to paying with their smartphones. Many of Apple’s partners are places that people don’t visit often: Macy’s (M), Foot Locker (FL), American Eagle Outfitters (AEO). But the most important partners are those that people visit multiple times a week, such as McDonald’s (MCD), Chevron (CVX), or Duane Reade (which is owned by Walgreens.)
The fact that stores are willing to stick with CurrentC even if it means antagonizing Apple customers illustrates how high the stakes are. Merchants are buying into mobile payments not because people are clamoring for them—few people are—but because they’re hoping to get something in return. With CurrentC, the promise is lower credit card fees and more consumer data. Of course, those will be small comforts if the system never catches on and customers become accustomed to going elsewhere. So far, at least, none of MCX’s backers has jumped ship.
The only other silver lining is that CurrentC’s launch is months away. Wal-Mart and company can hope that people have forgotten about this by then.
