The Apple Pay debacle is ultimately good for you

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This Whole Foods store in San Francisco accepts Apple Pay. CVS and Rite-Aid recently said they will no longer accept the new smartphone-payment system.

SAN FRANCISCO (MarketWatch) - With every story on the growing pains of Apple Pay, you can read or hear comments criticizing electronic-payment systems. 'I'm keeping my credit card,' or 'What mess. I'm going to stick with cash.'

Yes, of course, you're smarter than the rest of us. Credit and debit cards are accepted everywhere! Want to be safe? No one can find out where you live and tap your credit when you hand them a $20 bill.

Surely these were the same Luddite cries heard when credit cards were introduced and coins replaced seashells.

Take a deep breath, people. Change may not always be easy, but it's usually for the better. More than anything, it's inevitable.

That's why the much-publicized retailer backlash against Apple Inc.'s new iPhone payment system will ultimately fade away. Two things are almost certain to happen. First, retailers will give in. Second, Apple Pay will change, but not much.

Here's why. The decision by Rite Aid Corp. Wal-Mart Stores Inc. and other retailers to either reject or drop Apple Pay comes down to three issues. The first is obvious: Many chains don't have the readers in place chain-wide to accept payments. That's going to shift soon.

The second is fees. Apple is taking a cut of the processing fees, but those fees are paid by the issuing banks to Apple. Users, including both consumers and retailers, don't see it. There's some misunderstanding about that. Retailers do pay fees, but they're not paying anything extra to Apple.

Third, and this is the big one, is customer data. Apple Pay is nearly anonymous. There's no information that can be gleaned. It's almost like using cash. That's a big problem for retailers who crunch data. If you buy a table saw at the big-box hardware store, they use your address, sales history, whatever income information they can produce on you, to target you in the mail.

Big retailers combine little data into big data. So, for instance, they get a better idea of what inventory should be stocked at a particular store to maximize sales.

The data retailers collect from your card can be amped up with so-called rewards memberships. When you fill out that form for 10% off at, say, Old Navy (a unit of Gap Inc. ), that company can tailor its offers to you. One of those offers may be an Old Navy credit card - and now they could potentially track your every purchase: at competitors, where you eat, your gym membership and more.

Apple Pay and rival systems such as Google Wallet, a service of Google Inc. mostly bypass giving retailers your personal consumer information. You may care, or not care. It depends on how helpful, benign or intrusive you think it is. If you use Amazon.com Inc. chances are you don't care that much. And if you use a search engine regularly or allow web sites to store spy software on your computer, then the protection afforded in these payment systems isn't of concern to you. You're pretty much an open book anyway.

So this current skirmish is pretty much about customer data. To make matters worse for the retailers, they can't link their rewards programs to the cards, a least seamlessly. So they're coming up with their own phone-pay system under a consortium called the Merchant Customer Exchange. Its payment system, called CurrentC, uses a QR code, one of those fuzzy-looking black-and-white boxes you're supposed to scan with your phone. It's in pilot phase now, but CurrentC is supposed to roll out next year at Wal-Mart and Target Corp. among other retailers.

CurrentC is not only less streamlined than Apple Pay and Google Wallet, it allows that gleaning of personal information that retailers have come to depend on.

I don't know if it will survive, but if history is any indication, one of two things will happen: One or two of these payment systems will emerge as the winner. Or they all will survive with some modifications. CurrentC might give users an option to keep their information private. Apple Pay might allow users to share information. Once that happens, everyone will participate.

Last weekend I used Apple Pay at Mollie Stone's, a Bay Area grocery store. It was fast and easy. My only complaint was that I wasn't able to use the card I wanted. My small bank isn't enrolled in the system. And though I haven't given up plastic and cash, I'm certain there may be a day when all I have is my phone to pay for something. If that's a choice between Walgreen Co. which accepts Apple Pay, and CVS Health Corp. which doesn't, I won't have a choice of where to shop.

Ultimately, however, you and I will be able to use our phones to pay for things wherever we want. Just look at the ubiquitous Discover Card, a product of Discover Financial Services Rolled out in 1985 by Sears, Discover had its own advantages, namely no annual fee, something that was rare 30 years ago. Discover not only survived, it pushed its way into the Visa Inc. and MasterCard and American Express Co. universe.

The reality today is that all of these card-payment systems offer the same products. They are all almost universally accepted. Apple Pay and Google Wallet are just starting out, but they're not going anywhere. If you don't like their limits, that's fine. But cash and credit cards have their limits too - fraud and hacking with the latter, a lack of insurance and protection with the former.