When Apple Pay was announced at a highly-choreographed launch event in September, industry analysts and experts declared that the mobile payment system had a shot at doing what other digital wallets have so far failed to do: Dethrone plastic credit and debit cards as shoppers' default way of making a purchase.
But now, less than a week after the system's launch, Rite Aid and CVS have disabled their Apple Pay technology, a sign that the tech titan's quest to make its digital wallet ubiquitous may be more difficult than many thought.
The drugstore chains have not said why they have shut down this technology. CVS simply "cannot accept Apple Pay" or other mobile payment options that rely on similar technology, the company said in a statement. Both companies said they are continually evaluating various mobile payment technologies.
Analysts say the moves are likely a preemptive strike against Apple Pay by the two chain stores, which are part of a coalition of retailers building their own mobile payment offering. The group, known as the Merchant Customer Exchange, or MCX, includes stores such as Wal-Mart, Best Buy, Lowe's, and Dunkin' Donuts. Its offering, dubbed CurrentC, is slated to roll out in 2015 at 110,000 locations.
CurrentC would have some advantages over Apple Pay for retailers. CurrentC will draw money directly from a consumer's bank account instead of charging a credit card like Apple Pay does. This would allow retailers to avoid paying credit card companies what are known as swipe fees every time a customer pays with a credit card. CurrentC would also give retailers access to more data about shoppers, which they could use improve their marketing, merchandising and other strategies.
However, experts say consumers may prefer Apple Pay. Apple Pay's system relies on near-field communication chips, allowing users to wave their smartphones in front of a reader and confirm the purchase with a fingerprint scan. CurrentC, on the other hand, will require shoppers to use their smartphone's camera to take a picture of a code generated by the retailer, a series of steps that may feel slower and more complex to consumers than Apple Pay.
That sets up some complicated choices for retailers. Apple Pay may drive more sales if its convenient set-up appeals to a wider array of consumers. But CurrentC might help them trim costs by slashing swipe fees.
"The question is: What do they want to optimize, revenues or cost savings?" said Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods.
In bypassing credit cards, CurrentC also eliminates consumers ability to earn the coveted rewards points that they can rack up with credit and debit purchases. Sakhrani said those rewards programs have proven so popular with consumers that MCX might have to consider offering something comparable.
Though Rite Aid and CVS are not currently supporting Apple Pay, Apple still has a long list of partner retailers who are accepting this form of payment, including McDonald's, Macy's and Whole Foods Market.
"The feedback we are getting from customers and retailers about Apple Pay is overwhelmingly positive and enthusiastic," the company said in a statement. "We are working to get as many merchants as possible to support this convenient, secure and private payment option for consumers."
Apple Pay is available in some 220,000 store locations. Rite Aid has about 4,600 stores in the United States, while CVS has about 7,700.
On social media, it appeared that many shoppers were eager to use Apple Pay at CVS or Rite Aid and were disgruntled that they will not be able to do so.
@CVS_Extra looks like I can't currently accept shopping at CVS. I'm evaluating my pharmacy options.
— Tom (@thecleveralias) October 27, 2014
— Eric L. Stevens (@macgyverdxs) October 27, 2014
Still, it's possible CVS and Rite Aid retailers could resume using the technology in their stores if Apple Pay proves overwhelmingly popular. Both companies have said they are evaluating their mobile payment options, suggesting that they want to leave the door open to whatever technology gains most traction with consumers.
Andy Schmidt, a research director at CEB TowerGroup who studies mobile payments, said retailers could face a backlash if they give preference to CurrentC over Apple Pay.
"When you take choice away from the consumer, you chill adoption overall," Schmidt said.
Schmidt also added that retailers could be alienating an especially important customer if they choose not to accept Apple Pay.
"A number of studies have shown that Apple users tend to both make and spend more than Android users do," Schmidt said.