In the heavily competitive mobile payments market, the fastest way to lose is to pin all hopes on one vendor.
Rite Aid learned this lesson the hard way as a participant in the Merchant Customer Exchange (MCX), a multi-retailer mobile payments initiative that demanded exclusivity from its partners. Though Rite Aid had accepted contactless payments since at least 2008, it was one of the few retailers to shut off the capability upon Apple Pay's October 2014 launch.
This decision created an immediate media backlash against MCX and its backers, especially since they did not (and still do not) have a mobile wallet of their own to offer as an alternative. In the aftermath, MCX began to downplay its exclusivity requirement, opening the door for major supporters like Best Buy to also accept Apple Pay.
As of Aug. 15, Rite Aid will once again accept Apple Pay, Google Wallet and contactless payment cards. Despite this move, observers don't see Rite Aid as being on the forefront of mobile technology. MCX still hasn't launched its CurrentC wallet nationwide, and Rite Aid's move to once again accept contactless payments is more of a do-over than a step forward.
With Rite Aid inadvertently becoming one of the most well-known retailers to take a hostile stance toward Apple Pay, the pharmacy chain was likely deluged with requests from customers to accept the mobile wallet, said Tim Sloane, vice president of payments innovation for the Mercator Advisory Group.
"Rite Aid simply heard loud and clear that they're missing the boat on consumer demands for mobile payments," Sloane said.
But in restoring mobile wallet acceptance, Rite Aid loses some of its ability to steer consumers toward its preferred payment methods, since mobile wallets typically choose a default payment card regardless of the situation, he said.
"Investing in mobile technologies is just one piece of Rite Aids evolving digital strategy and we will continue to explore, test and implement innovative technologies that will help us to better serve our valued customers," said Ken Martindale, CEO of Rite Aid Stores and president of Rite Aid Corp., in a news release.
However, Rite Aid still hasn't fully embraced mobile technology. Unlike Apple Pay supporter McDonald's, it has decided to not support mobile payments in its drive-through windows. "Since those transactions are processed inside the store, mobile payment acceptance is not applicable in this scenario," said Ashley Flower, a Rite Aid spokesperson.
The most successful mobile wallets, such as the Starbucks app, are deeply embedded in the company's loyalty strategy and provide an incentive for consumers to use it. Rite Aid does not have this element, and it will not get it from Apple.
A retailer-branded mobile wallet could collect consumer data and even steer shoppers toward less expensive payment methods, such as ACH transfers or debit payments. This was the motivation behind MCX's CurrentC wallet plan.
Flower was non-committal when asked about Rite Aid's ongoing plans for CurrentC. "We continue to explore other emerging and innovative technologies that provide our customers with additional payment options," Flower said.
Rite Aid's decision to restore Apple Pay acceptance may have more to do with the competitive landscape than with its commitment to any particular technology initiative.
"In a lot of American cities, Walgreens and Rite Aid and CVS are occupying adjacent corners or are a block or two apart. Walgreens has been accepting Apple Pay," said Marianne Berry, Managing Director of Auriemmas Payment Insights practice. "Not sure if (Rite Aid) has seen a sales decline, but it might be a competitive issue."
CVS also blocked all contactless payments after Apple Pay's launch last year, and it has not yet restored the functionality.
Rite Aid may also be responding to the shift to EMV-chip card acceptance. In addition to improving security at the point of sale, EMV forces shoppers to try a new behavior, which makes this an ideal time to push mobile payments as a separate alternative to swiping a magstripe card.
"Any kind of disruption can cause people to change their usage patterns," Berry said. "Part of it is not making people do something new. This opens the door to other new things."
Rite Aid's move could also be a sign that the company has lost confidence in MCX. Shortly after Best Buy announced its support for Apple Pay, MCX CEO Dekkers Davidson left the initiative. And the venture has still not launched its mobile wallet platform even as Apple Pay nears its one-year anniversary.
"The boat is leaving the port and MCX is still at the dock. Three years after its inception, MCX has little to show for its efforts while the rest of the ecosystem is moving on and evolving without it," said Jordan McKee, a senior analyst with 451 Research. "I expect to see a steady stream of MCX member merchants announcing their support for Apple Pay and other [Near Field Communication]-based mobile wallets in coming months as exclusivity agreements expire. Smart merchants understand that they need to be where there customers want them. Limiting payment options at the point of salethe most pivotal moment of the shopping journeyis a recipe for disaster."
The growing tide of Apple Pay support is also a sign that mobile technology has evolved. Prior to last year's launch of the iPhone 6, no Apple smartphone has had NFC hardware built in. Today, NFC is common across multiple smartphone platforms. "Most retailers who have held off offering NFC payments will yield to the inevitable," said Thad Peterson, senior analyst with the Aite Group.
Rick Oglesby, the head of research for the consulting firm Double Diamond Group, also saw Rite Aid's move as good news for the card brands.
"MCX was hoping to build out a new payment network where banks would compete for mobile acceptance within participating MCX merchants," Oglesby said. "Achieving this goal would require a unified front of MCX merchants standing their ground against the networks, but that front no longer exists."