As featured on the BillingViews blog
What an anti-climax! Most of the predictions about the big Apple announcement were remarkably accurate. Bigger iPhones and the Apple Watch that looks remarkably like, well, a watch. Ho hum.
But wait, there was some news, also predicted, but of much greater significance than the new hardware – Apple Pay. My esteemed colleague, Jonathan Jensen, also got excited but for a different set of reasons.
Apple Pay is a masterstroke of genius that guarantees Apple a place in the finance and banking world, to go with its disruptive and, for a long time, dominant role in the telco space.
Apple has pulled off what countless pretenders have tried already but failed at – becoming the trusted partner to those ever-fearful card issuers. And it’s not as if it did anything revolutionary, Apple just bided its time to weed out what everyone in the chain really wanted – security and simplicity – the Apple trademarks.
Don’t get me wrong, I’m an Apple user but not a fan boy, however, Apple Pay may well become the next jewel in Apple’s crown if my thinking is right. Let me explain.
For years every man and his dog, literally, has been coming up with the ‘perfect’ e-payments, mobile payments, mobile wallet, NFC methodology; but no-one has succeeded in winning the hearts and minds of those that control the ecosystem – the money men. Even they can’t agree on one system themselves. This sector is fractured and the consumer that has multiple bank accounts, credit, debit and loyalty cards has all but given up.
Those bits of plastic that fill our wallets and purses are cheap to produce, easy to distribute and also have some marketing function but they are so, so unsecure!
The GSMA and its members thought it had the answer all those years ago by offering security via the SIM card and charge rent to the card issuers. Some magnanimously offered to share the commissions of the issuers as well. The mobile device with NFC capability, secure SIM and online transaction capability was all anyone could ask for and yet it failed.
Quoting the enormous success of NFC enabled phones in Japan and Korea as payment and transport enabling tools, device makers added them willy-nilly with no real plan on how they would attain market acceptance, let alone dominance, outside of those two unique markets.
We saw stickers attached to phones, Bluetooth enabled cards, RFID variations and after all that poncing around we’ve all ended up with NFC enabled plastic cards, and lots of them. The telcos have tried to break into payments themselves but you have to look very hard to find any success stories.
So Apple just sat back watching all this going on did nothing. Well, almost nothing. Until yesterday iPhones had no NFC capability but Apple had launched Passbook which was little more than a tool for keeping things like airline boarding passes, movie tickets, and gift cards all in one place, letting you scan your iPhone to check in for a flight, get into a movie, redeem a coupon, etc.
It wasn’t terribly clever or very innovative but it was dead easy to use and worked well with apps and messaging including email to collect the voucher, boarding passes, etc. Most importantly it appeared to be secure as well. Remember the magic words – simplicity and security?
Apple took that basic model, added some sexy security tweaks for the money guys and big retailers and came up with Apple Pay. It will use fingerprint scanners to verify users and NFC. The iPhones will add another layer of security by using a dynamic security code, replacing the static data on the magnetic strip of a typical card.
The one-time codes eliminate the need for merchants to receive sensitive customer account information. That purportedly makes the system less susceptible to fraud and hacker attacks. Visa, MasterCard and AmEx previously introduced industry standards for implementing the technology.
Suffice to say that the power of the Apple brand, its incredible success in disrupting the telecoms, content and apps markets and its perceived trust by consumers could place it in the role of the ‘trusted’ partner to everyone.
Card issuers still own the customer; they get a much more secure transaction mechanism that still uses their infrastructure and merchant terminals. The merchants get very speedy transactions with added security. The customer gets all his cards in one place, can easily select which one he wants to use and the transaction is secured by fingerprint, now tried and tested.
Of course, it’s early days yet and only the USA will get to test out Apple Pay initially, but I would not hesitate in saying this will be the best offering we’ve seen. We have no idea what deals Apple has struck with the likes of Visa, MasterCard and Amex, or with the big retailers, but it must have been very conducive for all of them to join up straight away.
Of course, the alternative to saying no, as some telcos discovered when the iPhone first came out, was to be left behind in the rush. With over 500 million iPhones in the market place, and many to be replaced by the iPhone 6 models, there is certainly a substantial base to work from.