Super short blog today. A 100% contrived story for context… (believe it is an accurate summary of what is going on today)
Apple to Card Network
Card Network: We would really love to tokenize all those 800M cards on file. Replace them all.. protect you and consumers from a data breach.
Apple: Whats our upside?
Card Network: well … PCI DSS we will give you a pass.. and in the future we may shift liability like we did with VBV/MSC
Apple: You think I’m going to let down my security and risk my brand and stop doing security audits for a certification.. I still have to accept cards for H/W Sales…
Card Network:.. hmm.. good point.. ok, but we won’t require you to have PCI DSS and we may be able to shift liability.
Apple: why don’t you just come back when you CAN shift liability? Also since I’m able to manage risk also treat as a card present transaction (CP interchange)
Card Network: you’ll have to talk to issuers about that interchange stuff, we could still do tokens.. after all we are tokenizing your cards for your new iPhone, just get rid of that old card number.
Apple: You mean get rid of it for the banks that participate in tokenizing through you. WHat about banks that want to generate their own tokens… they are coming to me too. Do I tokenize with them and then also tokenize with you..?
Card Network: ??? Banks are talking to you directly as well??? on Tokens??
Apple: Your network is driving me nuts. You know what I want, I will tokenize tomorrow if you get give me CP rates and shift liability.. but you won’t do that because if you do, I will never use NFC for card presentment and work with retailers to skip that whole payment terminal process (through BLE). You are trying to force me into supporting that darn tap and pay thing and I don’t want to do it.
— end of story —
Logically the new EMVCo token process, plus assurance information should eliminate the “barrier” between card present and card not present. However the Banks know that if tokens have a homogeneous treatment that they can’t enforce the protocol (NFC) and uniform behavior (tap and pay). Banks are not keen to support Apple in creating great consumer experiences which they can’t control. If tokens were treated at card present rates, they could be transmitted and exchanged in many different protocols (QR Codes, BLE, Wi-Fi, …). This would destroy MERCHANT Incentives to support contactless acceptance. This is my primary point today. Banks can’t let Apple win, or allow for the logical use of tokens as it would
#1 endanger ubiquitous acceptance.
#2 Allow consumers to use debit cards (more complex explanation which I will skip)
Banks want to control the phone to merchant interaction, just as MNOs do. As I described last week in the Apple Payment Experience, we are left with a world where the phone will have to talk to the merchant first (BLE) and then talk to the Bank (NFC) without a sharing of the payment information (and associated consumer attribution).
Networks have a strong desire to support apple, as Visa/MA/Amex “WIN” through card use, they don’t really care how card is used.. just that it is used. I sure do hope these things change.