We have a legitimate battle in the mobile payments arena as Apple Pay goes up against a powerful consortium of retailers, collectively known as MCX, and their payments solution, CurrentC. A mere few weeks ago, we didn’t even know a battle was going to occur, which underscores how complicated mobile payments are and how various parties have different goals in mind. Apple Pay is guided by ecosystem lock-in and privacy, while CurrentC is about better competitive positioning in terms of payment processing while collecting customer information. I suspect we are seeing the beginning of back and forth negotiation between Apple and the MCX consortium to find a middle ground focused on how to track customer information while keeping payment transactions secure.

I’ve long felt that Apple Pay adoption is dependent on universal acceptance as using Apple Pay, instead of credit card swiping, requires behavioral change and if Apple Pay is only accepted at a handful of retailers, the overarching impact will never go mainstream. Gas stations, fast food restaurants, and supermarkets are among the most frequently visited retail establishments, sometimes more than once a week, and Apple Pay’s current mind share in that space is low. While it is early in the game, many of these “convenience” retailers are already part of MCX and look at Apple Pay with caution as the service doesn’t put data collection as a priority and relies on credit cards (and we know how Americans love their credit cards).

Among the biggest complaints about MCX’s CurrentC is how information is collected about consumers, but there may be beneficial aspects of collecting such information, including reward points and loyalty sales. However, well-publicized recent data breaches have reinforced the view that there should be a clear limit as to what kind of information is tracked or shared with the retailer. Can Apple Pay’s treatment of credit card information be combined with opting-in to retailers loyalty programs in order to satisfy user’s privacy demands while supporting retailers’ business models?

In order to get a different look at the current mobile payments battle, Starbucks and Panera Bread represent interesting case studies. Starbucks is embracing Apple Pay by letting people use the service to reload the Starbucks mobile app, which is then used to pay at kiosks. Starbucks has previously said that roughly 15% of sales are done through the Starbucks app (not a trivial number). Panera is trying something a bit different with customers either required to hand the cashier a popular loyalty card, or providing a phone number, to receive benefits, and then using Apply Pay for payment. Starbucks and Panera are two restaurant chains that value timely ordering and payment, while relying on data utilization to improve offerings. Is this a pattern for other retailers to follow? Whole Foods has announced plans to rollout its own rewards program in 2015, which may involve downloading an iOS app. With Apple Pay rumored to eventually include loyalty programs via Passbook (I assume this would make a great home for these loyalty apps?); will this new feature entice MCX fringe members to jump ship?

I suspect the MCX consortium is positioning itself to gain leverage for getting technology companies, and their respective mobile offerings, to be more hospitable to retailers’ business models. This may be a longer-term issue with shifting credit fraud liability in the second half of 2015 representing another twist to this battle. While “power in numbers” may not work in some fights, for mobile payments it’s a formidable near-term strength for MCX. It’s clear that CurrentC is an inferior answer to Apple Pay, and even to the payments system consumers rely on now, so the question isn’t, “Will CurrentC beat Apple Pay?”, instead the question should be, “What elements of CurrentC are worth salvaging and then reworked to be included in Apple Pay?” Consumers like their credit cards, but dislike using credit cards. I think the credit card is here to stay and Apple Pay’s usage of credit card data is the way forward, voiding CurrentC, although Apple’s acceptance of loyalty programs is still a work in progress, keeping many retailers from moving away from MCX.

Friction exists between Apple and retailers as Apple Pay is focused on privacy while retailers have spent the better part of the last decade building their businesses on collecting the information that Apple Pay doesn’t value. I suspect Apple and MCX will eventually find some middle ground pertaining to tying in loyalty cards or rewards programs into Apple Pay, thereby enticing many MCX members to embrace Apple Pay.