On the brewing battle between Apple Pay and CurrentC

There’s a major battle brewing in the payments industry. On one side, Apple Pay sits on top of the existing credit card model, adding a layer of anonymizing security and ease of use.

On the other side is CurrentC, the brainchild of a consortium called the Merchant Customer Exchange, or MCX. CurrentC seeks to eliminate the credit card companies, and their fees, from the system. CurrentC is an alternative to credit cards, not an add-on.

There are several core issues here.

First, there’s the mechanics of the system. With Apple Pay, you place your phone near an NFC sensor, then touch TouchID to validate the purchase. With CurrentC, you first have to unlock your phone, launch the CurrentC app, wait for it to generate a QR code which you place in front of the scanner. You then enter a pin code to complete the process.

In stores, Apple Pay requires an iPhone 6 or 6 Plus and a merchant with an NFC terminal. CurrentC won’t be available before next year, but will work with existing merchant equipment, whereas Apple Pay will require merchants that don’t have the proper terminals to upgrade.

Both Apple Pay and CurrentC are backed by powerful market forces. Apple Pay is backed by Apple, of course, as well as most banks and credit card companies and a long list of merchants. CurrentC is opposed by the credit card companies, since the goal of the Merchant Customer Exchange is to completely eliminate credit card swiping fees from the equation. According the New York Times, the Merchant Customer Exchange represents more than a trillion dollars in sales which, if my math is right, would eliminate more than $20 billion in credit card fees.

Those savings are certainly a big motivation. Another is the loss of customer data. Apple Pay is, in some respects, anonymous. From Bloomberg:

Here’s what Panera ultimately wants from its participation in any mobile-payments system: a speedier link to the MyPanera Rewards loyalty program, which is used in half of all purchases. When a customer pays now, she either hands over her loyalty card or tells the cashier her phone number. Mobile payments should be able remove that step.

Apple Pay, with its built-in anonymity, won’t eliminate the need to swipe a loyalty card or give the cashier a phone number. ”Obviously, that’s not where we want to be,” says Blaine Hurst, Panera’s executive vice president for technology and transformation. “Why can’t I just walk up to a cashier with my phone and all that information magically appears?”

Harvesting customer data is a two edged sword, with privacy concerns on one side, and loyalty benefits, more focused service on the other. Apple Pay does not prevent the use of loyalty cards and the like, but it does not build that data in. If Apple can find a way to allow the customer to fold that information in to the Apple Pay stream if they choose to, that will eliminate that issue.