Sea change coming for how we pay for most anything

A member asks…

Hey Chris, I’ve got a new iPhone 6 and am just loving Apple Pay! But I’ve been hearing rumors that there’s something else coming out soon that’s better. Can you tell me what’s going on and what I need to do? Thanks!

A sea change is coming to our purchasing world. Here in the USA, by the end of next year we all get new credit cards to replace what we have now. That’s because Visa, MasterCard, American Express and Discover are finally forcing us into the 21st century (where the rest of the world is) with smart, microchip-enabled credit cards. This will make it much harder for counterfeiters to steal your credit card info, and that’s a great thing! But it still falls far short of where Google (with Google Wallet and the Android NFC-enabled smartphones) and now Apple (with the iPhone 6 and Apple Pay) are moving us.

I’m especially excited about Apple Pay because it will replace your credit card info with a ‘token’ used only once for a transaction, and your card info is encrypted securely in your smartphone. This means that Target, Home Depot, or wherever you shop will not have your credit card info in their system for a hacker to steal. Talk about awesome security! But it will take some time to get all the places you shop to institute Apple Pay, so don’t leave home without your credit card just yet. What’s really great is that within the next 12 months, most retailers will already have to replace the card swiping devices they use with ones that work with the new microchip-enabled credit cards. And most likely they’ll also have the Near Field Communication (NFC) capability that Apple Pay and Android phones require. You may have already seen and used these new devices at Whole Foods, McDonalds, Walgreens, and a bunch more retailers. Apple Pay’s list is at https://www.apple.com/apple-pay/, but anyplace that takes an NFC method of payment should work with Apple Pay. And Apple is signing up more and more banks whose credit cards you can plug into your iPhone for use with Apple Pay. This looks like a juggernaut!

There is a fly in the ointment that might impact all this rosy future dropping in on us. A number of retailers had previously created a consortium and are readying a new payment method called CurrentC – for release in 2015. You may have read about iPhone shoppers initially using Apple Pay at CVS, Walmart or Rite Aid, and then all of the sudden they couldn’t. That’s because those retailers are part of the CurrentC consortium. So even though their credit card terminals in the stores are capable of taking both Apple Pay and Google Wallet via NFC, the companies turned off that capability. I find it funny that Google Wallet’s been around since 2012 and uses the same NFC technology, but it wasn’t till Apple got in on the game that these companies switched off their NFC. I’m guessing that they foresaw an explosion in NFC payments, and took a re-look at their exclusivity agreements with CurrentC.

Now I believe that competition is a good thing, but CurrentC has three strikes against it already, and it’s not even available for general use yet!

1. It uses a klugey method with QR codes that is even more work to do than a simple credit card swipe (and Apple Pay is even easier than that),
2. It is less secure than your current credit card: CurrentC doesn’t work with your credit cards, but either directly with your bank account (aka debit card), or with other non-credit cards like loyalty cards. Your protection against fraud and theft with debit cards is much weaker than with credit cards, and CurrentC is really no more secure than the current credit card system because the retailer will have your financial info, ready for hackers to take.
3. CurrentC came about most probably as an action against the credit card fees that eat into retailers’ profit. And it’s designed to get more of your personal info into the retailers’ marketing systems. In short, it’s a solution that benefits the retailers, not you and me.

And a fourth strike, this morning CurrentC informed advance users (beta testers) of their system that their email addresses may have been compromised. I think we can all see where this is going…

Here’s my crystal ball on all of this: CurrentC is going to go forward because there’s already a tailwind of investment in it. And it’s going to fail because you and I are going to use what works easiest and best for us. That’s going to be Apple Pay (for iPhone users) and Google Wallet (for Android users). They both work on any NFC-enabled charge terminal in a store, regardless of whether the store has officially joined in or not. They are both way more secure than using even the new microchip-enabled credit cards, because they transmit one-time tokens instead of your credit card info, and your info is encrypted – on your smartphone in the case of iPhones, and at Google’s servers in the case of Google Wallet. Retailers are already aligning themselves either with CurrentC or with NFC/smartphone purchases like Apple Pay and Google Wallet. Hey even Paypal is getting on the NFC bandwagon! Along with your bank and credit card issuer, including Chase, Wells Fargo, American Express, Citi, BofA, and Capital One. As you and I shop, we’ll use our NFC method where we can, and a regular credit card when we can’t. CurrentC will tempt us with discounts and other offers, but that will only have a short-term effect. Retailers without NFC payment capability will see their revenue decline, as we shun them for retailers who let us pay with our preferred method. Consumers are smarter than CurrentC retailers give us credit for!

So what do you need to do? Nothing except I’d suggest you whip out your iPhone at checkout anytime you to to pay for something, and if they don’t accept it, grumble and use your credit card. I’d also recommend against anyone using CurrentC, unless you want to grab a quick discount you can’t get elsewhere. And about those new microchip-enabled credit cards? When they come, keep them just as secure as you treated your old credit cards.