Apple Inc. (NASDAQ: AAPL) just raised the stakes in the payment wars by adding rewards cards and department store credit cards to Apple Pay. This makes Apple Pay the first U.S. payment app offering both rewards cards and department store credit cards.
It might not give Apple much of an edge, because only one major retail rewards card program is offered through Apple Pay: Walgreens Balance Rewards from Walgreens (NASDAQ: WBA), which is the nation’s largest drugstore operator. The other rewards cards mentioned at Apple’s website are Dunkin’ Donuts DD Perks and MyPanera. According to Apple’s description, customers will be able to redeem the points directly through Apple Pay.
This is an impressive capability, but it is still extremely limited. Some of the most popular reward cards programs, such as those offered by the various Kroger supermarkets, Safeway and Target, are not integrated with it. One big boost for Apple would be to add the Safeway and Kroger programs, which allow consumers to accumulate points to get money off of fuel at the filling station through the program.
Such a program has helped Kroger become the nation’s most popular filling station operator with around 2,000 places for customers to fill up. Kroger customers get 10¢ off per gallon of gasoline or diesel fuel for every $100 worth of groceries they buy.
Apple Teams Up with JC Penney and Kohl’s
The only department store credit cards that customers can access through Apple Pay are those from JC Penney (NYSE: JCP) and Kohl’s (NYSE: KSS), two old-line department store brands that have been struggling to retain market share in recent years.
It is not clear how much this will help Apple because such cards are nowhere near as popular as they used to be. A far more valuable addition to Apple Pay would be Target’s RedCard. High-end department stores like Nordstrom’s and Macy’s would be major coups as well.
Interestingly enough, it is presumably possible to access the MasterCard- and Visa-branded credit cards offered by major retailers like Costco and Kroger through Apple Pay. What’s ironic is that those retailers do not yet take Apple Pay; both giants are waiting until the Merchant Customer Exchange, or MCX, rolls out its Current C payment app to jump on the Apple Pay bandwagon.
The Merchant Customer Exchange is an alternative payment network being developed by a consortium of major retailers that includes Walmart, Costco, Target and Kroger. It is currently testing Current C at a number of retail locations in Columbus, Ohio.
Apps That Accept Apple Pay
One of Apple Pay’s biggest advantages is all the apps that currently take it. Customers can now use Apple Pay to make purchases through the following branded apps:
- Best Buy
- Cole Haan
- The Disney Store
- Dunkin’ Donuts
- Hotel Tonight
- Levis Stadium
- Open Table
- Pin It
What’s truly interesting is that some companies that do not accept Apple Pay in their brick and mortar locations, such as Starbucks and Target, accept it online.
It looks like Apple Pay has a huge lead over Samsung Pay, Android Pay and Current C in the U.S. payment app market. One wonders if it can last and whether it will be enough to keep Apple Pay as the dominant payment application in the United States market.
Interestingly enough, Current C could be the biggest threat to Apple Pay even though Samsung Pay and Android Pay have beaten it to market. Current C could be a real menace to Apple Pay because it could presumably be utilized at major retailers that do not currently accept Apple Pay, including Walmart, Costco, Target and Kroger supermarkets.
Current C’s website contains a list of future locations that includes some huge names in retail, including Seven Eleven, Dillard’s, Gap, Kohl’s, Kum & Go gas stations, Bed Bath & Beyond, Best Buy, Banana Republic, Hobby Lobby, Lowe’s, Meijer, Old Navy, Publix, Rite Aid and Michael’s. It will also be accepted at a large number of gas stations, including Mobil, Phillips 66, Shell, 76, Conoco and Exxon. Unfortunately, it did not say when these stores will be added, only that they are coming.
If Current C could become the preferred app to use at gas stations, it would have a major edge over Apple Pay. One has to wonder how Apple will respond to that.
The first battle in the payment wars is over, and Apple is the clear victor. Unfortunately for Apple, the conflict has only begun and promises to heat up and get very bloody, very fast, very soon. Expect the 2015 holiday shopping season to mark a watershed in the battle for the credit cards and bank accounts of America.
Disclosure: the blogger owns shares of Kroger and PayPal holdings and plans to keep them for a long time.