CEO Tim Cook calls merchants' refusal to accept Apple Pay a 'skirmish'

Apple CEO Tim Cook called the battle with retailers like Walmart, Rite Aid, CVS and others over mobile payments only a "skirmish"

Apple CEO Tim Cook on Monday called the battle with retailers like Walmart, Rite Aid, CVS and others over mobile payments only a "skirmish" while speaking at the Wall Street Journal's technology conference.

"I think it's a skirmish, is where we see it," Cook said when asked if the refusal of some major U.S. merchants to accept the new Apple Pay was a problem for the company.

Cook was answering a question during an interview at WJSD, the business newspaper's annual technology conference. WJSD posted a video clip of a short segment of the interview on its website.

Cook also claimed that within the first 72 hours of Apple Pay's availability, the service had activated more than 1 million credit cards, a number he said was greater than the sum of all rival mobile payment services that use contact-free technology to authorize a point-of-sale purchase.

The Cupertino, Calif., company launched Apple Pay last week after distributing iOS 8.1 to iPhone and iPad owners.

"We've got a lot more to go," Cook acknowledged. "We've got a lot of merchants to sign up, a lot more banks to sign up. And we have the whole rest of the world. We're only in the U.S. right now. So we're just getting started."

The "skirmish" Cook alluded to was the news that several large U.S. retailers, including the Rite Aid and CVS pharmacy chains, had disabled their point-of-sale terminals' NFC (near-field communications) capabilities, blocking Apple Pay from being used in their stores. For several days last week, iPhone 6 and iPhone 6 Plus owners were able to use Apple Pay at the chains' terminals.

Neither Rite Aid nor CVS were among the merchants Apple said would support Apple Pay.

Rite Aid, CVS and others made the move because they are part of the Merchant Customer Exchange (MCX), a consortium of 58 of the country's biggest retailers, including 7-Eleven, Best Buy, Sears, Target and Walmart, the nation's largest.

MCX has developed a competing mobile payment service, dubbed CurrentC, and launched the network last month.

CurrentC and Apple Pay not only use very different approaches -- CurrentC relies on QR codes displayed on a smartphone's screen, while the Apple Pay uses the Touch ID fingerprint scanner to authenticate the customer and NFC to transmit "tokens" between an iPhone and the terminal -- but also different transactional networks.

While Apple Pay ties payments to American Express, MasterCard and Visa credit cards, MCX draws money directly from a customer's checking account through the Automated Clearing House (ACH) network. MCX was designed, say analysts, to sidestep credit cards and their transaction fees, part of a battle between large retailers -- Walmart especially -- and Visa and MasterCard that goes back nearly two decades.

Cook may have called the problems with MCX partners -- which are reportedly tied to a three-year exclusive deal that prevents them from accepting any but CurrentC payments -- a skirmish, but analysts have said that the mobile payment war will be a long slog for Apple.

"As an in-store purchasing experience, Apple Pay will remain niche both on a global scale and in the specific countries where it launches for the foreseeable future," said Jan Dawson, principal analyst at Jackdaw Research, in a post to Tech.pinions last week. "As availability of Apple Pay-compatible terminals spreads within the U.S., and as merchants and banks outside the U.S. start to sign on, the appeal and utility of the service will grow enormously over time. But that's the key point: This service won't be truly mainstream for years to come."

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