Retail Skirmish Blocks Apple Pay at Checkout Line

Retailer resistance to Apple Pay had been expected because Apple hasn't offered incentives to install pricey point-of-sale terminals and train staff on its new mobile payment system. But the decision to not accept Apple Pay by retailers that already have contactless terminals in the checkout line is a "skirmish" rooted in competition.

Big merchants like McDonald's, Macy's and Foot Locker are all accepting Apple Pay. But a consortium of retailers called Merchant Customer Exchange plans to offer a rival mobile payment system next year which could direct debit customers' checking accounts, instead of using a credit card. It also will be designed to track customer buying patterns to be able to offer targeted promotions. In the meantime, some of the group's biggest members, like CVS, 7-Eleven, Best Buy and Wal-Mart, are nixing so-called NFC payments even though they already have the point-of-sale technology in stores. Other retailers that aren't part of MCX, like Starbucks and Taco Bell, are opting to develop their own mobile payment services, and so aren't taking Apple Pay either. Queries into Merchant Customer Exchange were not returned.

"Retailers (that are part of Merchant Customer Exchange) are certainly going to give it a go on their own, they spent the last few years and money developing this," said eMarketer analyst Bryan Yeager. "Ultimately if there's enough consumer demand for it in the long run, maybe they will accept Apple Pay, but they're very much intent on trying to make a go at their own mobile wallet."

Although nascent, the appetite for mobile payment is growing. Mobile commerce is expected to total $305.7 billion in 2014, up 15.7 percent from the prior year, according to eMarketer.

Apple Pay launched October 20. On Monday, Apple CEO Tim Cook said the new mobile payment system had over 1 million activations in the first three days after it became available, and is now more widely used than any competing payment system. He called the dispute with retailers a "skirmish."

(Also see: Apple CEO Tim Cook Fires Back as Retailers Block Apple Pay)

"We've got a lot of merchants to sign up, a lot more banks to sign up and we have the whole rest of the world," he said at the WSJD Live Conference in Laguna Beach, California. "So we're just getting started."

Ben Heyman, 20, lives in Indianapolis and has used Apple Pay twice at McDonald's with no problem, once he figured out how close to hold his phone to the reader. He's originally from England, where contactless payment is more common, so he'd like to see it in wider use here.

"If it was in every shop I would use it everywhere," he said.

By next October, retailers will be required to have point-of-sale terminals that work with the new EMV chip-and-pin security standard for credit cards. Those terminals usually also have the "near-field communication" capability to work with Apple Pay, Google Wallet and Softcard systems, but they aren't automatically enabled to work with NFC. Is it really in retailers' interest to block customers from using mobile wallet services other than their own?

"Blocking mobile payments providers will deprive consumers of their preferred method of payment," said Jason Oxman, CEO of the Electronic Transactions Association, a trade organization for the payment-processing industry. "With more than 300 million mobile devices and more than one billion credit and debit cards in American consumers' pockets, the future ubiquity of mobile payments is certain."

Mallory Duncan, general counsel of retail lobbying group The National Retail Federation, defends retailers' choice.

"It is easy to second guess why a specific retailer chooses one technology or another, or what payments they will or will not accept, but you can be sure that the bottom line consideration is what is best for their company and their consumer," he said.

Travis Wacker, 25, from Milwaukee, Wisconsin, has used Apple Pay at Whole Foods, where he is a customer service supervisor.

"I'd prefer to be able to use it at all retailers, but it's not like make or break for me," he said. "I'm still going to shop at stores that don't let me use Apple Pay. I don't have an issue with swiping a card."