© Starpoint LLP, 2024. No part of this site, blog.starpointllp.com, may be reproduced or retransmitted, in whole or in part, in any manner without the permission of the copyright owner. Also see our Legal/Disclaimer (this is a highly opinionated and partially informed blog).

The Times (London) Article – May 29 2024

In January of this year, Apple offered commitments to the EU to assuage their concerns about NFC payments and mobile wallets related to the EU’s Marketplace Fairness Act (MFA—see blog). Apple’s approach follows Google’s model in Host Card Emulation (HCE—see Apple Developer Doc).

Curve (https://www.curve.com/en-gb/) is the first to announce that its iOS wallet is now capable of Host Card Emulation, enabling contactless (tap and pay) payments from Apple phones in the EU. I’ve written about Curve twice, in PayPal Innovation Opportunity – “All In” on the Consumer strategy and most recently in Visa – Flex Credentials Expands the Pipe.   Let me recap, and then I’ll share my thoughts on the challenges Apple faces in Curve. 

Recap of Curve

1. A UK-based company that has realized the vision of what Google and TXVIA put together in 2012: a single account (and Titanium Mastercard) that can wrap all of your other cards. Jonathan Weiner an OG Google Wallet team member has been a key backer. As I outlined in PayPal’s “All In”, the beauty of Curve’s product is in a maniacal consumer focus. Curve connect all cards, banks, and major payment networks within the UK. This strategy has amassed over 5 million customers across Europe and the UK. 
2. Centralizing all payment credentials into one “super wallet” allows consumers to connect “everything” across the retail financial ecosystem (every account type). Their Go-Back-in-Time® enables customers to move past purchases across accounts with automated or rules-based splitting among accounts that the consumer controls. This after purchase flexibilty ensures the right funding source is always used to reduce borrowing costs or increase rewards. 
3. As a result of Google’s 2012 efforts (see Google/TXVIA), networks set up new rules like a Staged Digital Wallet that prevented back-to-back transactions with a Card Instrument as the master account (see Don’t Wrap Me). PayPal and other wallets could continue to operate because they had their own consumer-direct (non-card) products.  Curve pushed EU regulators to nullify these rules.  It’s little wonder that MA supports Curve with significant marketing incentives, as Curve is strategic to Mastercard’s move toward a Layer 3 position with enhanced market share. 
4. Curve’s one-to-many card routing (allowed in EEA) allows similar functionality to Visa’s new Flexible credentials. Where Curve operates under the existing transaction mechanics, Visa’s Flex credential enables retrieval of the underlying card. It allows each Issuer to approve the “wrapping” entity or wallet just as they do under staged digital wallet rules. Both Visa VTS and MA MDES allow issuers to approve “wallets” and provision payment tokens. There are no US exceptions to this process.
5. In addition to selective transaction disposition, bringing cards and all account types together allows Curve to harness more data to power a single integrated  “Mint-Like” personal financial management system, enabling its own platform and 3rd party innovators (with consumer permission). 
6. Curve also offers cross-scheme loyalty rewards and programs in addition to transactions for all card types in the UK/EEA (see Curve rewards).
7. Consumer “Super Wallet”. Beyond Alipay in China and Google/PhonePE in India, I see Curve as the only OECD 20 market “Super App” capable of combining all cards and account-based transactions (ex Bill Pay) into a single interface. This leverages data and identity to offer other financial products and services in real time. This is the “all-in” strategy I recommended for PayPal. Where Dan had focused on building peace agreements with the big Issuers, Curve is focused on consumers and their needs.  
8. Curve has 4+ years of experience operating within the Android HCE model, their expansion to iOS provides wallet continuity independent of both banks and mobile OS. Also note that Curve provides white-label services to Samsung Pay in the UK (see Samsung Pay+ Powered by Curve) and is rumored to power PayPal’s future European Wallet. 

iOS Wallet Competition

We are in phase 2 of the Wallet Wars (See Phase 1 Battle of the Cloud – 2013). Last week, Worldpay’s global payments report 2024 showed that 50% of all eCommerce transactions are wallet-enabled. Google, Apple, Amazon, PayPal, Visa, Mastercard, Block, EWS, and Shopify, just to name a few, all believe that the Wallet is the central hub for the orchestration of “everything”. Wallets are how consumers connect outside the phone’s domain: payments, tickets, identity, loyalty, door keys, …etc.

Wallets are not the OS, but rather the interface point of where consumers exit the mobile walled garden and interact in another domain. This “wallet” interface is a unique combination of walled garden “off ramp”, “external” API with customer interface and (most importantly) consumer permission. Payments were the first items in the wallet because they were the best defined, with a well-understood consumer metaphor, economics for participation, and existing networks of participants. A “sheet of music” that everyone knew how to play.

Apple’s wallet dominates in the US and Europe. While regulators and Issuers complain that Apple’s dominance is due to its iron-clad control of iOS and NFC hardware, they have failed to prove it (see CFPB Probe of Apple Pay) given the open and free Android alternative.  Why is Apple’s wallet so dominant? Here is my shortlist:

1. Card required to activate a new phone (2014 Brilliance)
2. App store integration. Even when there is an alternative wallet, consumers must have a card associated with their Apple account. 
3. Consumer experience. It’s easy and intuitive with data made available.
4. Integration across all Apple hardware and wearable devices. 
5. Merchants like ApplePay. Better conversions, lower fraud, less data leakage 
6. Secure with best-in-class eCom fraud rates (after Issuer provisioning)
7. ApplePay brand and ubiquity. POS, In-App, In-Browser 
8. ApplePay security (from tokenization, biometrics, firmware, secure element, enclave). 
9. Apple’s financial products – Apple Cash, Apple card, Apple Pay Later, …etc
10. Consumers trust Apple for their privacy and their data. 
11. Organizationally, they have more experience and leadership continuity (in payments/wallet) than any other bank, network or BigTech.
12. Perhaps #1 – established consumer behavior. It always works. Consumers love and trust Apple.

Apple’s weaknesses

1. Banks don’t like Apple
2. Everyone is concerned about Apple’s dominance
3. Card Focused w/ Apple taking economics from Issuer in transaction
4. They are a very tough partner 

Can Curve’s new iOS wallet make progress against Apple?

Curve has obtained the support of EU/UK Issuers (no wallet fee), EU/UK Bank Consortiums, Visa, Mastercard, and Regulators. For Curve to succeed, they need to prove a few things: 1) a better customer experience than Apple’s—which is a high bar to begin with; 2) the ability to scale quickly (something partners can help with). 

US traction has 4 barriers.

1. Apple HCE is EEA only.
2. Visa’s Staged Digital Wallet rules
3. US Issuers control “wallet” participation and tokenization through provisioning. 
4. US merchants can block any wallet as part of the final settlement (see Settlement). 

eCom vs POS

Worldpay’s data proves the importance of wallets in eCom. US banks have chosen eCom as the focus of the PAZE wallet for reasons outlined in Paze Update. While eCom “wallets” have fewer technical constraints, they are much more challenged to gain traction: 

• Top 6 eCom merchants account for over 70% of sales
• Cards on File
• Consumer Preferences
• Merchants complaints regarding tokenization (disputes, returns, PAR)
• Consumer behavior (ex Amazon One Click)
• Merchants in control of CX, own fraud risk and the data to make decisions

For example, Amazon, Walmart, Target and Uber will not change either the CX or the payment process. I believe Paze eCom’s opportunity is limited to high fraud merchants or merchants with a substantial net new consumer base.  The current PAZE consortium is challenged by these market factor AND a governance structure that makes it next to impossible to execute.  James Anderson (Paze CEO) has no time to focus on market needs or products; he must keep 7 Issuers aligned. 

POS Wallet is a better focus in the US as contactless based payments are just getting started (US is 5-7 years behind EEA/UK in contactless adoption). Where a handful of merchants control consumer behavior in eCom, POS is in “control” of card networks (with the 4 barriers above constraining action).  Given the lack of eCom progress and merchant support (list of PAZE merchants), a pivot (or expansion) to POS would make sense. If not for PAZE, I see X.com, Amazon, Square, PayPal and others as leading contenders.

Consumer Experience

Paze’s EEA/UK wallet provides bank aggregation under a PAZE brand. However, the underlying architecture could change to allow Issuers to maintain their brands. It could also integrate existing SRC assets and continue on the current path in eCommerce by enabling consumers to decide which card to select at the time of purchase. 

Curve’s consumer value proposition is holistic and expands beyond cards and beyond just payments. Partners like Samsung and PayPal will drive adoption and place them firmly as the #1 Apple wallet competitor. I am confident that  US banks, PayPal, X.com, Square, and others could leverage Curve to build substantial momentum in POS wallets. There are no barriers in the EEA/UK, none in US for Android, with only hurdles of merchant support and HCE for Apple US on iOS. 

With respect to the US, Curve has tremendous potential but can’t do it alone. While they have the most consumer-friendly model, they need support from Issuers and perhaps one other consumer-focused financial aggregator. For example, suppose the PAZE team kept the SRC framework in eCom and provided the iOS wallet app for HCE for POS. In that case, they may be able to leapfrog their current attempt to build a challenged eCom Wallet with a tap-and-pay wallet that works on Android and iOS, just as consumer behavior is taking off. 

I like Curve because it creates a unified customer experience across all financial services and drives competition. Google and Amazon operate like this in India. Curve does it in a card model. Competition is always good for markets. I would make the case the Curve is a good thing for Issuers, Consumers and even Apple (as it demonstrates the ability of a 3rd party to build on Apple’s platform). If Curve wins in the EEA/UK, they have done something right. That is what effective markets look like. 

At the end of the day, I believe that Issuers should support anything that reinforces cards, and Curve does just that. Will there be a new song?