11 Sept 2014 – Remembering our loved and lost
Think about Apple: the world’s greatest consumer products company, maker of the world’s best most secure phone, coolest new watch, the best physical retailer ($/sq ft), holder of the most profitable handset, and the most profitable handset owners (demographic), the #2 brand in the world, the remaker of music, the inventor of new product categories, the platitudes could go on and on…. Apple did so many things right this week! Wow.. what a device! I mean devices.. !
What is the stupidest thing I could do here in this blog… really. Teach Apple a branding lesson!? Yep .. and I’m an engineer. Apple, please make sure that the Apple brand stops at the device.. Today “ApplePay” is accepted at any merchant that accepts Visa PayWave, MasterCard PayPass, Amex … There is no ApplePay acceptance mark that we know of.. so please lets keep it that way. My guess is that Apple is considering something here, this is the reason for the post. Logically, the reason Apple wants to brand payments, is that they want to change the payment process. As I pointed out previously, Apple has created a wonderful BLE experience, which the banks were not yet ready to support (with CP rates). My strong recommendation to Apple is to keep focused on the phone’s presentment of payment products across many protocols.. don’t create an acceptance brand.
As I stated in my blog this week, phones are becoming a commodity and evolving beyond how you orchestrate an individual’s life (music, photos, books, documents, mail, contacts, …) to how phone can help consumers INTERACT in their environment: Commerce, Healthcare, Fitness… With respect to the former.. Apple really doesn’t do much for retailers today. They don’t advertise, they don’t do much in maps and communication, they don’t do payments. In short, today Apple doesn’t bring a consumer into a store, improve engagement while shopping, build loyalty (to the store), or help with payment. Who helps the store with these activities? NCR, IBM, Micros, Oracle, IBM, Toshiba, Catalina, Datalogix, dunhumby, and a thousand others.
Given that Apple is one of the smartest companies in the world, my hope is that they have plans here that will become more fully known. Perhaps ApplePay was the consumer launch and that iBeacons and Accept ApplePay will be a new merchant launch. We can see from the enormous patent flow that Apple and Gimbal have put tremendous thought to physical commerce and iBeacons. But even if this is the case, Retail is a REALLY REALLY big space ($4 Trillion), for Apple to be successful in “Commerce” they must create a model where participants invest and other companies can make money too… After all, who would want to do business on the NASDAQ stock exchange if they captured 70% of the market’s value? Partnerships and extra-Apple value creation has been the KEY weakness of Apple.
When you build a commerce platform, the objective is to interconnect everyone. To interconnect everyone, you must have a case for “everyone” to connect, and a few open/defined standards. There are three basic approaches: a critical mass of buyers, a critical mass of sellers or remain neutral. Obviously, Apple operates on the consumer friendly “buy side” of commerce, and is consumer focused to its CORE. But buy side markets and networks are hard to maintain. Tilting too heavily toward any party is difficult (network effects), unless the consumer has already chosen your brand based upon the value you are currently creating. Amazon is the leader and great example here.. they are also buy side focused. Consumers GO TO Amazon to buy and Amazon CAN brand everything because the consumer entered their store with the objective of shopping.
The ApplePay rollout in eCommerce looks fantastic, with vendors like Stripe ready to help online retailers move today. ApplePay at the Point of Sale however is a big branding mistake (for Apple, banks and for retailers). Retail is between a consumer and a merchant. Retailers attract consumers through product, promotions, price, or convenience.. each is different. Introducing a new consumer brand in retail that is BEYOND the retailers control is not something that makes sense.. not for a commerce orchestrator (Apple, Google, ..) or for the Retailer (in less than 18% of handsets). Whereas online, consumers entered the “virtual store” through their Apple device.. in the physical world.. Apple did nothing.. the consumer is not going through the Apple device. Thus my view is that ApplePay works online.. but not at the POS.. Whereas all other NFC solutions acted as a wallet “container” where a consumer purchased with the card of their choice, apple has branded the payment process..
Think about it this way: would starbucks throw out the most successful mobile payments application in the US in favor of ApplePay? No way! Why? Their consumers are using it..? sure that is one reason. But Starbucks demonstrates that merchants are best placed to deliver value, loyalty and drive consumer interaction in a way that benefits them. Apple has a rather poor reputation in working with partners, and agreeing to industry standards. Retailers considering ApplePay should talk to a few Apple peripheral manufactures on interfaces, standards, stakeholder influence and firewire. Apple can’t create an industry standard in ApplePay, it is probably not trying to either. In fact, for payments ApplePay is operating on the Visa/MA standards. Why would merchants want to allow Apple to build brand here? What is the FUTURE of allowing this brand in? Visa and MA don’t control it.. Retailers don’t control it.. and there is no commitment to industry standards where retailers can influence it.
As a commerce platform you can’t be biased. To create consumer value, you can’t push a consumer to a product, to a retailer, toward a payment method.. let the consumer decide. To create merchant value, you can’t push brand and proprietary connections in an area where you do nothing today. Remember the ApplePay product does NOTHING new that a current plastic card can’t do.. Visa and Mastercard acquired merchants with a new product 50 years ago.. cards delivered tremendous value: instant credit, open acceptance, defined standards, multi stakeholder rule making. Do you (merchants) want to give all this up for something that just holds the card?
What do merchants want? The MCX team are friends of mine. Their new CurrentC app may not make much sense to outsiders, but they are operating as an “Intel Inside” kind of model, a white label, “in the guts” kind of service that each MCX member can build around. Each retailer can customize how payments are done, how loyalty is done, how data is shared. ADS and Amex Serve also operate in this whitelabel merchant friendly model.. MCX may be a little bit dreamy.. and I don’t see a future where retailers will stop accepting Visa and Mastercard… but I certainly don’t see retailers jumping over themselves to let another brand come between them and their customer (unless it is VERY VERY neutral). Remember, payment works REALLY WELL .. there is no problem here (payment).
Merchants will want to have Beacons, but they want to support all consumers.. not just iPhone 6 consumers.. therefore Retailers will manage beacons they control (which will work across Android too). This means standards and open-ness. Merchants want mobile to work for EVERYONE in the store. From a platform perspective, support storage and transaction signing for any product/app. When I sign a transaction with biometics.. do I really need to call it ApplePay? Don’t you want everyone to build on your platform?
Apple, I strongly recommend adapting your commerce platform strategy to be much more like Intel’s. Open up iPhone 6 capabilities for others to use.. start talking up your APIs, win in the handset.. create an ecosystem. Think about it this way.. if ApplePay is the brand, who else will invest in making this work beyond you? Merchants will invest if it drives more sales, higher margins, or if not doing it means loss of these. But retail is a zero sum game.. I’m not going to buy MORE gas and groceries.. so it is about switching in the flux.. once this flux dies.. so does your product. This is not a long term commerce strategy. Apple doesn’t need to build more loyalty with its consumers, and there is certainly very little upside (15bps) for the transaction. What Apple needs to do: become the platform for commerce.
My recommendations for Apple
1) Break with rules and give strong hints that your merchant value proposition is coming.. soon
2) Hire some retail execs that can run with a commerce platform strategy, and move on the message
3) Create an IAL equivalent, and start working with MCX and other major retailers around the world.. LISTEN first.. find a way to make the iPhone work in Commerce.
4) Recast the ApplePay Brand as something that stays in the iPhone, and you are not going to push it on retailers…
Yes I have drunk the Google cool aide, yes I am one of their biggest fans, and they have been my absolute best client. So you can brush this off as pundit platitudes, but this is one of the few companies in the world I have ever seen where Fortune 100 companies CALL INTO and ask to meet with. Google is “in the Kimono” with every major Chief Marketing Officer on the planet, they have STRONG retailer relationships because they deliver value to retailers and manufacturers TODAY. Thus, I maintain that Google is 5 years ahead in ABILITY to deliver value to merchants today: influencing consumers before they shop, engaging consumers while they shop, checking out, paying, support of private label cards, open platform for any app, no emphasis of Google’s brand in the store. Google’s weakness.. retailer fear of data use.
This is actually the focus of my new company: CommerceSignals.. I want to find a way to enable 1000 new start ups, helping millions of retailers, MNOs and banks interact with consumers via mobile. Getting real time data is hard.. I want to make it easier.. for MCX, for Facebook, and for the next 1000 start ups. We are still in stealth mode, but more to come here shortly. (My investors not super excited I maintain this blog for fear of me pissing people off).
Congrats on tokenization.. what was rolled out yesterday was the best, most secure payment product in history.. I can’t wait to see this roll out in 100 other products and bank applications. Visa, MA and Issuers are winners here no matter what.
As a former Citi and Wachovia payments, mobile, internet guy I can assure you that banks were none to happy about the ApplePay brand. Remember Banks saw this future, and had a reason for resisting EMV chip and PIN. They created a tokenization initiative 4 years ago in the TCH to deal with this, with the hope of creating a new Visa. The bank mantra “if we have a token in the phone, we don’t want it to be a V token, or a MA token, .. we want it to be OUR token”. Logical … but I completely agree with Charlie and Ajay, that a token that wraps a V/MA card is still a V/MA card.. and there was no way for the TCH initiative to deal with the acquiring/acceptance.
The last time banks allowed a brand to tackle a new area of payments.. was PAYPAL.. and banks said “NEVER AGAIN”.. so much for that. My G2 says that banks took this same “Never Again” approach to the ApplePay brand until as recently as 3 months ago.. Apple won the game of chicken. I just can’t believe that banks are allowing Apple to BRAND payments.. it makes no sense for Apple either.. Unless perhaps they are buying FDC from KKR (this is a joke).