Apple Pay Is Too Anonymous for Some Retailers

Apple Pay Is Too Anonymous for Some Retailers
Merchants see mobile payments as a way to learn more about their customers. Apple Pay has made that virtually impossible (Source: Apple Inc.)
Source: Apple Inc.

Apple Chief Executive Officer Tim Cook loves to talk about the security features of his mobile-payments system. Apple Pay won’t collect information about what people buy—and it’s designed to ensure no one else can, either. Merchants have good reason to be excited about Apple Pay, which goes live on Monday at some 220,000 shops and restaurants. But some retailers are less than thrilled about Apple’s anonymous infrastructure.

To understand why, take a look Panera Bread. The sandwich chain fancies itself an early adopter and has been experimenting with taking to-go orders through its app and deploying tablets in place of cashiers. Here’s what Panera ultimately wants from its participation in any mobile-payments system: a speedier link to the MyPanera Rewards loyalty program, which is used in half of all purchases. When a customer pays now, she either hands over her loyalty card or tells the cashier her phone number. Mobile payments should be able remove that step.

Apple Pay, with its built-in anonymity, won’t eliminate the need to swipe a loyalty card or give the cashier a phone number. ”Obviously, that’s not where we want to be,” says Blaine Hurst, Panera’s executive vice president for technology and transformation. “Why can’t I just walk up to a cashier with my phone and all that information magically appears?”

Hurst still thinks Apple Pay will be a big deal even if it can’t help with the harvest of customer data; he sees this incarnation as a prelude to a more fully realized version in the future. Panera is trying to build its own technology to speed up the loyalty program, he says, while hoping that Apple gets there first. When asked whether Panera discussed its concerns with Apple as it prepared for the launch, Hurst declines to comment. “Answering questions like that is likely to get me in trouble,” he says.

Denée Carrington, an analyst at Forrester Research, thinks Apple’s approach to customer data is one of Apple Pay’s biggest shortcomings. Mobile payments haven’t taken off in part because customers and merchants seem pretty satisfied with the current system of cash and plastic. Stores without compelling reason to push a new payment system could very well decide not to bother. The anonymity of Apple Pay, she points out, ensures that customers will get only a marginally more convenient experience at the counter. “Data privacy is a double-edged sword,” says Carrington.

The world’s largest retailer,Wal-Mart Stores, is rejecting Apple Pay altogether. It has said it has no plans to accept Apple’s payments, and is working on its own system developed by Merchant Customer Exchange, or MCX, in conjunction with a handful of other big merchants. MCX and Wal-Mart declined to discuss their reasons for not working with Apple Pay. Analysts say the primary reason for the parallel effort is to make sure that merchants retain control of the relationship with their customers.

Starbucks, the one retailer so far to figure out mobile payments on its own, also is noticeably half-hearted in its embrace of Apple Pay. IPhone users will be able to use Apple Pay to buy credits through the Starbucks mobile app in the next few months. But there’s no timeline for accepting Apple Pay at the cashier, in part because Starbucks hasn’t invested in the near-field communication devices needed to accept payments from iPhones.

Like Panera, Starbucks mostly sees mobile payments as a way to insinuate itself deeper into its customers’ lives through loyalty programs. About 15 percent of transactions in Starbucks locations in the U.S. already take place through its own mobile app, and the coffee chain said last week it’s introducing an order-ahead app in Portland, Ore. this year ahead of a planned national launch in 2015. The coffee giant doesn’t want to mess up the good thing it has going. “Right now, when you use your mobile app,” says Linda Mills, a Starbucks spokeswoman, ”you get all these benefits that we want to make sure won’t go away.”

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