2 May 2014
Many great blog comments. Let me go through some generic questions/answers.
Apple wants BLE/Beacons/Tokens… but will not release wallet with this capability for following reasons (my best guess):
- Issuers must approve Token/Beacon model: creation/provisioning of token (TSP), use of tokens (not eCommerce), and assurance information. This was the reason behind my Assurance Blog this week.
- Apple is keeping the Banks in the dark to protect information on the launch (probably a good idea).
- Similarly merchants are being kept in the dark, no coordinated acceptance infrastructure. Thus iBeacons will likely be a phase 2 (or limited phase 1).
- Politics/negotiations/existing agreements. My guess is that Apple does want revenue from this new product, but will be disappointed. There is no economic model for a wallet provider in a card present transaction. This has been one of the reasons why NFC/Provisioning has failed, and the credit card only model.
- Payment is NOT the focus of Apple’s new services and Hardware.. (see blog Apple Greatest Asset – Ability to Change Consumer Behavior)
What makes most obvious sense for Apple in Payments?
In a perfect world Apple would convert all 600M cards to tokens and leverage this both for iBeacon/POS presentment AND for eCommerce. I believe this was their initial plan.. and still their plan. My view is that all eCommerce merchants and wallet providers would be glad to let the networks exchange COF for tokens.. a few of the big ones are my clients. Lets just say the network’s message “you have to work with EACH issuer on card present pricing, value proposition and data”. Yep it is that bad.
As you can imagine Issuers want revenue, credit card usage is incremental revenue.. Everything else in the iBeacon/token model above is a LOSS, thus Issuers are not exactly running to support. Thus token business issues abound for: debit, eCommerce, wallets, data, control, acceptance, …etc.
For example, Banks hate the idea of losing card not present (CNP) rates for eCommerce and having the networks locked into the TSP role. So Apple must keep a token in the phone, and also keep the 600M cards on file until the payment networks can get the cojones to define standards around assurance, tokens in eCommerce, and force issuer acceptance of risk and card present rates. Issuers have a strong case for caution, as Networks did this before (eCommerce/CNP liability shift) and failed miserably (see my blog vbv/msc Failure, and Bruce Schnieier’s similar post).
Data, data, data. My belief is that Apple is taking on the role of consumer champion (see blog Apple’s Platform Strategy: Consumer Champion). Apple may not realize that the this new architecture meaningfully impacts both bank and merchant data services. Merchants and processors will no longer have insight into the consumer card number, which in many cases is used for analytics and loyalty.
- Durbin/Hybrid Card. Per rule you can NOT wrap a debit card with a credit card. The card type must also be know to the merchant. If the Apple wallet has only one card per network, and consumer can store a debit card.. then that card must be a debit card. Perhaps Apple doesn’t know this, or the implications. Someone is pulling a fast one.. the networks certainly know this rule, and undoubtedly will feign ignorance when consumers try to register their debit cards… only to find out later that they can’t be used.
- Acceptance. If Apple launches with credit card only they will have failed to deliver any merchant benefit, or act as consumer champion. Similarly merchants (ex MCX consortium) will have little case for adding contactless acceptance if they don’t know the card/cost or everything is a credit.
- Process for taking the 600M cards on file and auto registering them with the networks. This could be going on now, with the networks building an issuer interface for approval.
- Tokens. Apple really wants to make this happen, but only Amex and Paypal are in a position to support. My recommendation to Apple would be to get moving with tokens and Amex… as a lever to make V/MA networks get moving.
- Pilot Merchants. Beyond the Apple store, I would pick Macy’s, Nordstrom, American Eagle, Gap, and a few others out as the most innovative in payments.. and the most likely pilot customers for a iBeacon shopping and checkout experience. Keep your eyes peeled.
- Will Apple move forward with an iBeacon breakout without network/issuer support? This would make sense in the US, where contactless adoption is terrible. Apple certainly has the expertise (and cash) to go strong on iBeacons, go around the networks and treat as CNP transaction (owning the fraud/risk) and manage the fraud internally. The could do this in select retailers (in US), and focus EMV Contactless capability outside the US.
I believe Apple didn’t put NFC in the 5s because they thought that they could launch Beacons without the Network’s support. When launched all iPhones will be able to take advantage (only BLE H/W dependency).