Supermarket Chain Publix Says It's Rolling Out Apple Pay Support All Stores [Update: No]

[tmiw]

Interesting survey, thanks for providing it. However, your underlying theory that merchants are resisting contactless payments as a means of fending off card payments in general is not correct. It was undoubtedly true years ago that some merchants resisted card payments simply due to processing fees; however, that has long ceased to be the case for the vast majority simply due to consumer demand. Most merchants realize that they couldn't survive by demanding consumers pay in cash/check. You're envisioning a world that doesn't largely exist anymore.

Yes, many do accept cards now because customers demand it. However, some stores aren't exactly happy about that. The lawsuit settlement that I linked to came about in part because those merchants felt that taking cards (especially ones that cost them the most to run) is part of a pattern of anti-competitive practices on the part of the card networks.

In fact, there are some that feel that the settlement doesn't go far enough and opted out of the first settlement attempt (and very well could opt out of the current one too). In their ideal world, they'd like interchange to be capped to much lower levels than now, or if not, at least the ability to reject more expensive cards. And if the latter comes to pass, I'm not sure how that can be done when one can use a payment method (Apple Pay) that the cashier can't exactly police.

What's fascinating is that many, if not most, merchants now prefer card payment over cash because there are significant costs to handling cash. Indeed, the movement is away from accepting cash as merchants realize that a cash transaction is significantly slower, employee theft/mistake is much greater, it allows for fraud, both in terms of counterfeit money and bad checks (a problem so huge many merchants refuse to accept them), deprives them of customer data, has significant processing costs on the back end, and eliminates the potential for customer self-service options.

There are some that don't take cash anymore, but I find that to still be the extreme minority. The vast majority of stores still take cash, and at least a few prefer it over cards (to the point where they surcharge the latter and/or mandate minimum purchase amounts for their use). Gas stations are a particularly common example of such.

To give a couple of examples. Grocery stores used to universally refuse to accept credit cards due to the low mark ups they were dealing with. However, they came to realize that consumer demand and the need to speed up lines and in order to effectively install customer self-service, card payment was essential. That's why Kroger, the largest grocery chain in the US, is adopting contactless payments, but refusing, for now, to accept Apple Pay as they desperately try to get consumers to adopt Kroger Pay. Ditto, with Walmart, Home Depot, etc., they don't discourage card payments as you suggest, but they are going to make a final ditch effort to get you to use their systems before they give up and accept Apple Pay.

Kroger flat out stopped taking Visa credit cards at a couple of their chains, while a Walmart exec famously said that "I don’t know that MCX will succeed, and I don’t care. As long as Visa suffers" (not to mention that they also stopped taking Visa in Canada for a period of time before they worked out something with them). That's not really an indication that either is okay with the whole card situation.

Of course, CurrentC has now proven itself to be a failure, possibly in part due to only accepting store cards and ACH. That's probably why their apps still take regular credit and debit cards, at least for now. Considering their previous history of fighting with the networks, though, it's very possible that once enough people start using those apps, an ACH or other less expensive payment option could appear with associated incentives to switch away from using cards.

One final note, we can't ignore the implementation costs for large merchants to accept Apple Pay and other contactless payments. It cost Costco millions of dollars to switch to NFC capable readers, and until they were convinced that enough consumers had started using their phones and watches for payments, there was no impetus to rush out new readers. They have now done so.

Costco got the hardware to support contactless when they upgraded to support EMV. Most places likely do have the hardware as well due to that same upgrade. However, the software aspect is another issue (as mentioned in my other reply below). It's possible Costco got help from Visa and Citi to perform the necessary software updates and certification to support contactless as part of the deal to switch away from AmEx, something that many merchants probably can't avail themselves of.

The store management turns off the option in their master pay terminal settings. Support is in almost every system, but the store have the ability to determine what they do and don’t support. Really stupid on Publix management support.

The hardware supports it, sure, and perhaps even the software that runs on the terminal itself. However, a lot of places in the US use custom POS software and integration that results in the store itself needing to be certified to run contactless transactions (much the same as was the case with chip cards). While that probably isn't the case for Publix due to them having had contactless at some test stores at some point, there are some that would probably like to enable it but can't just yet.

 

[glowplug]

In fact, there are some that feel that the settlement doesn't go far enough and opted out of the first settlement attempt (and very well could opt out of the current one too). In their ideal world, they'd like interchange to be capped to much lower levels than now, or if not, at least the ability to reject more expensive cards. And if the latter comes to pass, I'm not sure how that can be done when one can use a payment method (Apple Pay) that the cashier can't exactly police.

It would not be surprising if Apple at some point decides to bypass VISA and MC altogether, in effect creating a third payment network. They are alredy poised to launch their own credit card (with partner Goldman Sachs) and seemingly want to revolutionize consumer credit.

 

[tmiw]

It would not be surprising if Apple at some point decides to bypass VISA and MC altogether, in effect creating a third payment network. They are alredy poised to launch their own credit card (with partner Goldman Sachs) and seemingly want to revolutionize consumer credit.

Maybe. However, the merchant acceptance problem was solved elsewhere through a combination of strong regulation and/or lower interchange, making it not worth the trouble for merchants to meddle with what their payment terminals accept. There's no reason why the US couldn't be the same if, say, contactless acceptance was mandated.

In addition, I'm not sure what Apple could bring to the table by having their own payment network. It'd be a tough sell for merchants, anyway, as evidenced by AmEx acceptance still not being nearly as common as Visa or MC.

 

[glowplug]

In addition, I'm not sure what Apple could bring to the table by having their own payment network. It'd be a tough sell for merchants, anyway, as evidenced by AmEx acceptance still not being nearly as common as Visa or MC.

Agreed it only makes sense if Apple brings something to the table, but there are ways that Apple can innovate.

I’ve wanted “digital receipts” from the day Apple Pay launched. Sure Apple could cobble together a solution out of band with the POS terminal, but the logical way to accomplish this is by adding it to the payment channel.

There is a lot of slop in transaction costs for existing payment systems to account for fraud. Up until now the payment networks and issuing banks have been satisfied with good enough security, and considered fraud a cost of doing business. With the advent of biometrics on phones, and contactless payment, Apple can revolutionize the security of transactions. Better security means less fraud, and the ability to offer lower interchange fees.

A few years ago there was talk that Apple (and a few other tech companies) were considering an acquisition of Discover Bank, which could have given them access to Discover’s payment network.

 

[tmiw]

I’ve wanted “digital receipts” from the day Apple Pay launched. Sure Apple could cobble together a solution out of band with the POS terminal, but the logical way to accomplish this is by adding it to the payment channel.

Wouldn't this conflict with Apple's privacy goals, though?

There is a lot of slop in transaction costs for existing payment systems to account for fraud. Up until now the payment networks and issuing banks have been satisfied with good enough security, and considered fraud a cost of doing business. With the advent of biometrics on phones, and contactless payment, Apple can revolutionize the security of transactions. Better security means less fraud, and the ability to offer lower interchange fees.

Europe had chip and PIN for more than a decade before the US, yet it still took laws being passed for interchange to actually go down. I'm not sure additional security would be enough in the US market to trigger decreases, but there could be cost savings from serving as both the acquirer and the issuer (which is what AmEx in effect does).

 

[nburwell]

I really don't understand the reasoning behind companies not adopting Apple Pay, and adopting their own payment method. But hey, that's just me.

 

[deeddawg]

Free coffee doesn't persuade you?

Award system is so paltry these days as to be not worth the bother. I suppose if you're going there a couple times a day or dropping a bunch of cash each time it might be worth keeping their app handy. I go rarely, and thus no reason to bother with anything other than simple ApplePay

 

[MisterSavage]

The vast majority of stores still take cash, and at least a few prefer it over cards (to the point where they surcharge the latter and/or mandate minimum purchase amounts for their use). Gas stations are a particularly common example of such.

I'm not sure I would agree it's common. The only time I see gas stations with a "cash price" sign is in a rough part of town. I haven't paid cash for gas in at least 20 years.

 

[jhfenton]

7-11 has a great implementation also. Their reward app lets me put an entry for them in my Apple Wallet. So when I get a drink I get them to scan the barcode on my watch and then pay with my watch. I earn rewards and they track what I'm buying without the need for any "7-11 pay" nonsense.

That's good to hear. We don't have any 7-11 stores in southern Ohio, but the more stores that do it right, the better.

Our regional convenient store/gas station/ice cream parlor chain, United Dairy Farmers (UDF), has only just started updating their POS terminals in the last few weeks. The existing terminals still don't have chip readers, let alone NFC. The new terminals--they said they were in 3 stores out of more than 200--do have NFC, and Apple Pay worked fine. I imagine it'll be quite a while before they integrate their loyalty program. Some of their new gas pumps have NFC hardware too, but they don't seem to be turned on.

 

[tmiw]

I'm not sure I would agree it's common. The only time I see gas stations with a "cash price" sign is in a rough part of town. I haven't paid cash for gas in at least 20 years.

By "common" I mean that it's the most likely example one will run into of a business surcharging and/or having a minimum, not necessarily that most or all gas stations in general do (though I do see it quite a bit where I live in part thanks to Arco's 35c card surcharge).