Wednesday, September 17, 2014

Apple Pay Rejection Leads to Bigger Question

I read this article, Walmart, Best Buy Reject Apple Pay, earlier today, and it got me thinking.

I understand that scanning a QR code is a simpler payment process than NFC technology. It might not be as fast as  Pay, but it should be quicker and more secure than the current credit card technology. I also get the point that Walmart and Best Buy want to use their own joint venture technology, MCX. Their technology is like a stored-value card. But this article lead me to a more fundamental question. Why do companies like Target and Home Depot keep retail customers' credit card numbers?


A customer swipes their credit card at the point of sale. The transation could be run as an authorization in the case of a restaurant or gas station. More likely, it'll be a sales transaction to capture the funds. To complete the transaction the merchant processor sends back an authorization number. That should be the end of the transaction. The merchant doesn't need to store the customer's credit card number. When my local cafe swipes my credit card with Square, they aren't privy to my credit card details. Reconciliation can be done via the authorization number. Returns and even recurring charges can also be accomplished using the authorization number.

So, I'm wondering what the advantage is for the big box retailers to keep retail customers' credit card numbers on file. I'm sure there's a good answer explaining why it's worth the risk.

Update: CNNMoney cybersecurity reporter, Jose Paglier, replied to some of my questions. He said retailers use my credit card number to figure out where I live. That's fine, but once they figure out who I am, they shouldn't need my credit card number anymore. At the very least, retailers could store my credit card number as a one way hash. They could still figure out which locations I shop at without my credit card number being compromised.

1 comment:

Michael Darius said...

Owen Williams with TheNextWeb said it best: “Payments companies reacting so bitterly to Apple Pay only means one thing: They're afraid of how popular it'll be”