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MCX merchants restricted to CurrentC payment system, using Apple Pay incurs fines

Partners of the Merchant Customer Exchange consortium, which include retail giants Walmart, CVS, The Gap and more, are contractually obliged to use the upcoming CurrentC mobile payments solution, a forthcoming competitor to Apple Pay, one report says.

Citing anonymous sources with knowledge of the matter, The New York Times reported on Tuesday that MCX partners are forbidden from using mobile payment alternatives like Apple Pay, lest they incur high penalty fees for broken contracts.

The report confirms suspicions of systematic Apple Pay denial first aroused when MCX merchants Rite Aid and CVS began declining Apple Pay transactions this past weekend. Prior to that, retail monolith Walmart and fellow MCX partner Best Buy said they would not support Apple Pay.

Walmart commented on the matter yesterday, saying MCX has consumers' best interests in mind in denying Apple Pay and other mobile payments options.

MCX is on the brink of rolling out its own mobile payments competitor in 2015 called CurrentC, an app-based solution in development since 2012. CurrentC generates unique QR codes upon checkout, requiring users present their smartphone to a cashier. Alternatively, the point-of-sale terminal may also generate a code to be scanned by the customer.

The consortium is looking to bypass credit card network fees by linking directly to customers' bank accounts, but the security implications of such a system are troubling at best. In addition to avoiding swipe fees, CurrentC enables purchase tracking and processing for loyalty programs, coupons and special offers to further boost MCX merchant sales.

Apple Pay, on the other hand, is anonymized, designed to work seamlessly with compatible POS terminals and does not share customer purchasing metrics with retailers. Facilitated through NFC technology, iPhones users can simply take out their handset and authenticate a purchase via Touch ID. On the backend, a secure NFC module monitors for nearby terminals and sends over tokenized payment data from a secure hardware element without need for additional user interaction.

At this point, only iPhone 6 and iPhone 6 Plus hardware is capable of performing in-store Apple Pay purchases, though Touch ID-equipped devices like the new iPad models can make in-app purchases through the payment system's online component. The Apple Watch will also support contactless Apple Pay when it launches early next year.

Apple CEO Tim Cook on Monday said users activated more than one million cards with Apple Pay in the first 72 hours of availability, making it the largest contactless payments service in the country. As for adoption from reluctant merchants like those that make up MCX, Cook said the "skirmish" would ultimately be decided by consumers "over the long arc of time."