30 April 2014
I’m on a roll, so thought I would put this out there as a positive prediction (vs describing how Apple is Throwing GSMA’s NFC under the Bus). My views are as much informed from the “negative” as the positive. For example, my starting hypothesis is Apple will enable a POS payment capability in iPhone 6. It was the reason for the timing of the Oct 2013 “token” announcement from the big 3 payment networks. As most of us asked “where on earth did this come from”…. It came from Apple (or the network response to Apple’s initial plan).
My problem in figuring out what is going on (if anything) is that Banks have no idea what Apple is planning. Current guess below revolves around assumption that the 3 payment networks do understand the plan. Thus the question becomes “what can Apple do in payments that starts with the payment networks, but does not involve the banks”? Constraints? It must involve: tokens, Apple’s security architecture, 600M cards on file, existing card presentment infrastructure, existing rules, recent lessons learned, and be able to expand to iBeacons.
- Apple will have a certified EMV contactless capability from V, MA and Amex in the iPhone 6.
- Apple’s contactless is a proprietary architecture, based upon both tokens, and 3 card emulation applications (4 perhaps with Paypal)
- Each Network will act as a Token Service Provider (TSP), with one token in each card emulation application. The TSP specs give this away, per the Spec, the TSP must be approved by issuer and have ability to translate token to Card. Apple may want to be the TSP… but Banks will say no. This solves a BIG problem with card provisioning, with V/MA/Amex already having the “proxy” card/token provisioned in the iPhone, and each bank working with respective network to turn on their card. This is the Google model, with the networks running the TSP as opposed to Google/TXVIA.
- Apple will not work in iBeacon model at launch, but rather EMV Contactless. You notice I’m not saying NFC.. from a merchants perspective this will look like NFC, and use the NFC protocol, but certainly not from a GSMA NFC perspective. There are no other vendors in this solution beyond Apple and their hardware suppliers (?Broadcom?)
- Cards will be “provisioned” into the wallet through complex process involving Issuing banks, TSPs, and Apple. Apple’s inventory of Cards on file will be registered with the TSPs, and Banks issuers will approve based upon Token Assurance information , MNO information, card usage information … (yesterday’s blog).
- Fingerprint will be key process which unlocks card/wallet and enables EMV Contactless interaction. Customer experience? EMV Contactless, consumer unlocks phone with fingerprint and authorizes purchase on Payment Terminal. iBeacon? Same thing only works on all iPhones via BLE (no proximity/NFC)
- How will Apple make money on this? They won’t… nada. Altough there COULD be a way forward given that the product presented to merchant is in control of Networks AND the Issuers are in control of their cards.. a potential… but given lack of issuer participation, I have no idea of how they would pull this off. I do believe that there are groups in Apple that want to make money on a card present transaction, but join the club.. there is no economic model in any network agreement for a wallet provider.
- I want to emphasize again.. this is just the easy payment part. I strongly believe that looking at payments in isolation is the wrong way to view this (see Blog).
I like this.. IF consumers can choose which payment products to store in phone (debit card). I think the Bank Issuers will flip out when they hear that V/MA have locked themselves into the TSP role.. talk about a reversal from TCH. Issuers could make the case that the networks own the fraud loss since it is a network proxy card wrapping the issuers card…. can’t wait for that one to happen.
I’m 90% confident in the above… lets see if I can keep my perfect track record on Apple, Google, Tokens and NFC.