Apple iPhone's Mobile Payments Expected to Include CVS and Walgreens
Apple's upcoming mobile payment system will get a big head start with the country's two largest pharmacy chains coming on board. — CVS and Walgreens are expected to accept purchases made with the new iPhone payment system …
Context & Ripple Effects
Apple's wallet push has been assembling in public for a week: Bloomberg reported on August 31, 2014 that Apple had lined up Visa, Mastercard, and American Express so iPhone 6 owners can pay in physical stores. Today's Re/code report adds the merchant layer — CVS and Walgreens, the country's two largest pharmacy chains, are expected to accept the system at launch, though both the payment system itself and the pharmacy partnerships remain unconfirmed ahead of Apple's September 9 event.
The pickup was broad — eight outlets from The Register to MacRumors ran the same report on or about September 5 — which signals how much weight analysts are putting on launch-day merchant density rather than the token technology itself.
First-order effects
- If the report holds, Apple's payment system launches with national brick-and-mortar acceptance at two of the highest-frequency retail chains in the US, giving iPhone 6 owners immediate everyday use cases instead of a cold-start problem.
- CVS and Walgreens become reference merchants: their participation is the proof point Apple needs to sign the next tier of national retailers.
Second-order effects
- Rival wallets — Google Wallet most directly — face a distribution problem they can't buy their way out of, since Apple's acceptance network arrives bundled with the default payment credential on new iPhones.
- Merchant-side coalitions building alternative payment rails now have to compete against a consumer experience preinstalled on the fastest-selling phone line, raising the bar for any retailer-owned wallet to justify its own app.
Third-order effects
- Pharmacy and convenience retail — high-frequency, low-ticket categories — look set to become the proving ground where contactless phone payments either establish daily habit or stall, setting the template for how the rest of national retail adopts.
- The structure taking shape is a contest between platform-owned wallets riding handset defaults and merchant-owned alternatives, with card networks positioned to win either way through tokenized volume.
The trend: US retail payments are consolidating around handset-default wallets whose viability is decided by launch-day merchant density, with pharmacies as the first battleground.