Why don’t more retailers use Apple Pay or other NFC payment systems?
Major grocers don’t allow payment via smartwatches, but rural gas stations do
Science fiction writer William Gibson famously declared in 2003, “The future is already here — it’s just not evenly distributed.”
But after using my watch to buy a bottle of water at a truck stop on the way to Corpus Christi, I can report that the future’s ubiquity is a lot more complete.
I used the touchless payment system called Apple Pay on an Apple Watch at the Love’s Travel Stop in Edna, on U.S. 59 midway between Houston and Corpus. While I use it all the time in town, even on the coffee machines at the office — its appearance in this rural context kind of blew my mind.
It also got me thinking. While Apple Pay and other types of mobile payment systems are increasingly common, it’s interesting who is not yet using them.
Why wouldn’t a merchant adopt this technology? Using a smartphone or watch to handle a retail transaction is a fast, simple and secure customer experience regardless of whether you’re using Apple Pay or its Android-based
competitors Google Pay and Samsung Pay. There’s a little learning curve, but once you set it up on your device, it’s much faster and safer than using a credit card.
These systems employ microprocessors that enable a technology called Near Field Communications, or NFC, in which radio signals communicate with merchants’ payment terminals in a secure fashion. Once you register one or more credit cards with the digital wallet on your device, all that’s needed is a tap on the terminal and a verification of identity to complete the transaction.
With Apple Pay, verification is done either through fingerprints using Touch ID or with facial recognition (Face ID) on the iPhone X.
The chip is also built into the Apple Watch, which is why I was able to pay without even pulling my iPhone out of my pocket in Edna. The verification comes because the Watch has constant contact with my body, which is established when I first put it on and enter a PIN to unlock it.
Apple Pay’s adoption was slow when it launched in 2014, but it gained momentum as merchants switched over to payment terminals that took cards with built-in security chips. Retailers had to upgrade anyway, and many added terminals that allowed for tap-to-pay systems.
During Apple’s secondquarter earnings call with analysts last week, CEO Tim Cook said Apple Pay had a record billion-plus transactions during that period. In addition, he said, Apple Pay was coming to two big holdouts — the 7-11 and CVS chains. It soon will also be available in Germany.
Why don’t more retailers offer it? It’s not necessarily more expensive, because Apple takes its reported 0.15 percent cut at the bank level, not from the retailer. Merchants do need to invest in terminals that support it, but many chipreading terminals can handle NFC transactions out of the box.
In some cases, big retailers want to develop their own smartphone payment schemes. Walmart, for example, has its own system called Walmart Pay that uses QR codes generated on the phone for making payments. CVS and 7-11 were using a similar system called CurrentC, but that was sold to JP Morgan Chase.
“Basically, they don’t want to get sucked into Apple’s big black hole,” said Roger Kay, tech market analyst and co-founder of Endpoint Technologies Association. “Once you’re stuck with Apple, well, you’re stuck with Apple. You have to do it their way.”
Kay added that, “in a strictly rational world”, merchants should have no issue with it because of lowered costs and convenience to the customer.
In Houston, two of the largest grocery chains, Kroger and San Antoniobased H-E-B, don’t accept Apple Pay. I asked the companies for an interview to explore their reasons, but they demurred, sending along prepared statements that generically said they are always evaluating new technologies.
H-E-B is the most surprising holdout because it has terminals prominently displaying the symbol for NFC payments at many of its checkouts. I often look to see if it’s working when I check out at my neighborhood H-E-B in Montrose and express my dismay to the checker.
The response I usually get: “Yeah, a lot of people tell us they want it. Maybe someday.”
H-E-B is testing a selfcheckout app called H-E-B Go at two of its stores in San Antonio and one in New Braunfels. It lets users scan the bar codes on products, then pay using a QR code.
That may be why the company isn’t opting to use Apple Pay, but there’s no reason why the two systems couldn’t co-exist, should H-E-B roll it out to all its stores.
Grocers in the Houston area that support it include Randall’s, Whole Foods Market and Trader Joe’s. Even some independent grocers, such as 99 Ranch Market on Interstate 10 at Blalock, take it.
Kay said the grocery business operates on very slim margins, which might be another reason Kroger and H-E-B are balking. Indeed, Kroger recently announced it would drop support for Visa credit cards in one of its smaller, discount-store chains, citing the cost of transactions, and may expand the ban to all its stores.
Love’s added support for Apple Pay, Google Pay and other NFC-based systems a year ago in May and recently tweaked terminals to make it more obvious that it’s available, said Dave Frankenfield, vice president of marketing at the Oklahoma City-based company.
It was added as Love’s upgraded its pumps and in-store terminals to provider other high-tech support, including an app that lets truckers configure gas pumps from the comfort of their cabs, he said.
Drivers of both passenger vehicles and big rigs are using it, he added.
“We didn’t have high expectations for” Apple Pay, Frankenfield said. “But it has exceeded our expectations.”