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Senator tries to get to the bottom of mobile payments battle

Sen. Richard Blumenthal (D-Conn.) is trying to get to the bottom of reports that some retailers have blocked new mobile payment systems, like Apple Pay and Google Wallet, denying customers a secure payment option.

A number of retailers such as Walmart, Rite Aid, 7-Eleven, and CVS, all part of a coalition called Merchant Customer Exchange (MCX), are working to launch their own mobile payment system called CurrentC. Soon after Apple Pay launched in October 2014, certain MCX retailers, such as RiteAid and CVS, disabled their near field communications terminals to shut out Apple Pay and others that use the technology.

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For Blumenthal, refusing to accept Apple Pay or Google Wallet constitutes a security risk to consumers’ personal information.

“Consumers should not be denied payment options that protect their personal privacy and financial data, and businesses should not act in concert to stifle competition. Payment systems using tokenization have the potential to revolutionize commerce by reducing fraud, increasing privacy and security, and saving money for both consumers and businesses,” Blumenthal wrote in a letter to Brian Mooney, interim CEO of Merchant Customer Exchange. Many businesses prioritize the ability to block fraudsters from damaging their business and reputation and so look to solutions to curtail payment fraud such as software designed to stop losses.

Merchants that sign with MCX must agree to an unspecified exclusivity period. “When merchants join us, they have a choice,” Rankin told USA Today last year. “They can’t have Apple Pay or Google Wallet until their exclusivity expires.” He wouldn’t say how long the term lasts, but said “it’s closer to months than years.”

FierceWirelessIT reported that MCX began signing its retail partners to three-year exclusivity deals, starting in January 2013. Firms that signed on early may be free to accept Apple Pay and other mobile payments systems starting in 2016, which could explain Rankin’s use of the word “months.”

Complicating the picture is the fact that CurrentC is slated to launch in August 2015, so retailers have been chained to an exclusivity deal for a payment service that wasn’t up and running. One chain, Michigan-based Meijer, has reportedly defied the terms of the exclusivity agreement and has been offering both Apple Pay and Google Wallet now, and plans to have MCX as well. Best Buy, also an MCX participant, started accepting Apple Pay through its iPhone app in April 2015 and stated in a press release that “…all U.S. Best Buy stores will begin accepting Apple Pay later this year.”

Unlike Apple Pay, CurrentC does not link to major bank credit cards, only to a customer’s bank account or to credit cards issued by the retailers. Discounts and coupons can be automatically applied to the purchase, and any loyalty program points can be automatically pegged to the customer’s account. While avoiding Visa and MasterCard transaction fees is the reason retailers are supporting CurrentC, these loyalty and discount programs may be the main selling point retailers use to try to convince customers to sign up for CurrentC.

Blumenthal asked Mooney to respond by August 30 to a long list of questions :

  • Are MCX members prohibited from using competing mobile wallet payment platforms such as Apple Pay?
  • How will consumers benefit by the prohibition on MCX members from enabling their POS terminals to be used by competing mobile wallet payment platforms?
  • Are there circumstances under which MCX members will be allowed to accept payment through competing mobile wallet payment platforms?
  • What transaction data does MCX collect in connection with a consumer purchases?
  • With whom does MCX share any personal and transaction data collected at the point of sale?
  • How is an individual’s financial account protected through the use of the MCX platform?

Since security is a paramount concern for payment systems, MCX suffered a bit of black eye when it issued a statement in October 2014 admitting that the email addresses of participants in its pilot CurrentC program had been hacked by third-parties.

Katy on the Hill reached out to MCX for comment.