CurrentC Gets Hacked.

October 30, 2014 0 Comments

Well, this didn’t take long. Hacked before your product could even reach the marketplace. That has to be some sort of talent there…

20141029_currentc

Why exactly is this important? It really isn’t. I have an iPhone 6, and I generally like to use Apple Pay whenever the occasion presents itself; however, it doesn’t mean that I have a personal vendetta against MCX or a grudge against its mobile payment app, CurrentC. The only reason this is getting such big media coverage is due to the fact that Apple Pay was recently released as an add-on for iOS 8 and iPhone 6/6Plus users, and the reason many of them won’t be able to use this new feature (including myself) is all because of CurrentC. If anything, this particular incident could be seen as a wakeup call or a reminder to consumers what is in store for them when they decide to use a tool that is specifically designed to track your consumer information, personal data and regular shopping habits.

This minor setback (minor considering that the only information that seems to have been stole was email addresses) won’t delay the development of CurrentC. It also won’t change the ‘consortium of retailers’ from changing their minds about adopting it. As much as they claim to care about overall consumer privacy, adequate shopping experience and keeping their cost low, their hands seem to be tied. Retailers such as CVS (NYSE: CVS) and Rite Aid (NYSE: RAD  are contractually porhibitied from accepting any other mobile payment transactions, such as Apple Pay.

From The New York Times:

… under the terms of their MCX contractual agreement, they are not supposed to accept competing mobile payments products like Apple Pay, according to multiple retailers involved with MCX, who spoke on the condition of anonymity. If these retailers break their contracts, they will face steep fines for doing so, these people said.

Although it isn’t clear why they have decided to accept other mobile payment systems such as Google Wallet during this time. Most likely because Google Wallet is not as easy to use.

Other retailers, such as Walgreens (NYSE: WAG) have jumped at the opportunity to take advantage of this mobile payment debacle between Apple and MCX by siding with Apple Pay (Walgreens is an Apple Pay Partner), with their new slogan #choiceiseverything. Now my friends have a real reason to make me feel like a douche for not shopping at Walgreens.

As I have said before, I have no intention of taking any sides of this war. I have no intentions of writing anger emails to Rite Aid/CVS corporate offices. I have no intention of boycotting these retailers and sending my business to firms that support the technology I choose to use. Consumers will always be consumers, and they will let their personal feelings get in the way of what is feasible and logical. There is nothing wong with that. After all, the customer is always right (supposedly). However, that is their propagative, not mine. For me, it is generally bad business to let your personal feelings get in the way of doing what is in your best interest.

I like Rite Aid, for personal reaons and for business reasons. I like the fact that their prices are cheaper than Walgreens and their subsidary, Duane Reade. I like the fact that they have a points program that benefits and consumer and makes sense. I don’t like being incentivized (or forced) into buying something I don’t want just to achieve some short term montary gain out of it, which is what happens with Walgreens ‘Balance Rewards’ program. So Rite Aid and CVS aren’t completely innocent when it comes to this regard. Rite Aid is also the closest retailer to me within walking distance, as the closest Duane Reade recently shut down and the closest Walgreens is a mile away. As for CVS, I am not a frequent shopper there and I really don’t know much about the rewards program. All I know is that they have self-checkout machines, which makes everything quicker.

From a business standpoint, I think Rite Aid is a good investment. I think the company is growing very strong and has made more strong commitments towards long-term growth opporunities. Their compariable script count grew 3.7% YoY in Q2015. This resulted in a total comparable sales growth of 4.1% and an overall sales growth of 3.9% YoY.

Aside from adopting this CurrenctC app, the company has been making more efforts in improving its cost structure. The company has signed a five-year agreement with McKesson, which is aimed at lowing cost and improving efficiency in the supply chain. In terms of earnings growth, RAD outperforms their market competitors with a long term earnings growth of 17.50%, while CVS has an earnings growth of  13.29%, and Walgreens is at the bottom with a 12.17%. This along with current valauations of all three companies, Rite Aid continues to look attractive. Rite Aid is currently trading at a forward P/E of 13.4x, compared to CVS, which is trading at a P/E of 17x earnings and Walgreens trading at 15.8x.

So I won’t be changing my investment or shopping habits because of this debacle. It is unclear whether or not Apple Pay will be enough harm the sales growth of both RAD and CVS. It is unlikely that poor sales will be enough to change their stance. The only things we can do, as consumers, is wait for his MCX contract to expire or wait for CurrentC to make it to the marketplace. Then and only then will these retailers see this attempt to save 2% – 3% on credit card tranactions as fuitle, and maybe the consortium will change their minds on Apple Pay on their own. Or, we can wait until other retailers have adopted the NFC tehcnology for contactless payments.

Either way, our only options seem to be is wait, because this problem isn’t going to solve itself overnight.

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