Google+Softcard Levels Field Against Apple

24 Feb 2014

Well done Google. As predicted last month, Google announced last night that it had acquired “some exciting technology and IP from Softcard”. The price? My guess is around $50-60M, plus multi year revenue share (below). This is a FAR cry from the $3-$4 BILLION that these same Mobile Operators wanted for “NFC RIGHTS” in 2011. Google proposed a rev share back then too.. but MNOs were convinced they could go it alone. After dropping almost a billion in ISIS/Softcard with no future revenue of any kind in sight the drivers of the deal were obvious. Not only did carriers need an exit for their investment, they needed a partnership that gives them a role in the future of mCommerce.

What technology will stay? The SE Keys and the vending machine acceptance terminals.. seriously.. 98% of what ISIS/Softcard was is completely dead. My biggest unknown? I would love to see if Amex Serve could pick up the pre-paid card from Mastercard.. as the banks wanted to beat up my good friend Ed McLaughlin for doing what I still think was one of the best most innovative deals ever (Google pre-paid).SONY DSC

What did Google get? MANDATORY GOOGLE WALLET. That’s right, now EVERY ANDROID phone sold by the carriers will have wallet installed. This addresses a key advantage that Apple has in mandating an iTunes account (with credit card) for activating the iPhone. Apple’s brilliant registration process allowed it to know its customers (ID, card on file) where Android/Google did not. Many analysts believe that this ID/Payment deficiency is THE KEY reason why Apple’s environment is 8x-10x more profitable with less than 20% of the handsets. Now Google can compete in all things which require identity+payment. Not JUST in buying apps/music in Google Play, but in orchestrating commerce and brokering identity. I cannot understate the win here for Google. A brilliant move, and I firmly believe that this was the primary driver of the deal. Don’t look at this as a ApplePay competitive thing, it is about enabling Google to identify every Android holder as a default “opt in” during phone activation (iTunes Account Mandatory = Wallet Account Mandatory).

The Carriers? A partner that will share revenue. Where Apple takes 15bps for itself, my guess is that Google will give that to the MNOs, plus some revenue share for play services. My TOP 2015 prediction was that this would be the year of partnerships.. This is certainly my top new one for the year. MNOs are losing sleep about Apple’s unmatched “walled garden”, no one plays but Apple here. Google is developing an open model and this deal may be the first template for MNO/Platform revenue sharing.

Banks? Google will likely slowly “roll out” of its Google Wallet Card (also see TXVIA blog) which wrapped all other cards in a Mastercard Debit. Banks will be able to sign up for Google Wallet through network agreements just as they do for ApplePay today (at same rates/rules). This will mean that the networks will provision bank cards as tokens, and that Google will also benefit from forthcoming CNP token rules this summer. The primary difference in GW operation is HCE+Tokens (see blog). The Google Wallet model is not dependent on the SE Keys, or SD storage.. but it CAN operate in a non HCE model (from its GW 1.0 lineage).

Payment Networks. BIG WIN. Cards are the defacto standard for everything in mobile. I’m interested to see if the networks recognize (certify) the HCE card emulation application, as of 3 months ago it was still not certified. My belief is that they certify as part of tokenization scheme acceptance. This is a funny side story in itself. Most would ask how Google Wallet could run a non-certified card emulation app. Remember that the ONLY card being emulated was a Google owned mastercard debit.. just a brilliant work around. Note that in ApplePlay, Apple operates as a tier 1 token requestor in the current ApplePay model, and V/MA/Amex are tier 2 token requestors (see this excellent blog by SimplyTapp). In the Google model Visa and Mastercard will act as both Tier 1 and Tier 2 token requestors.

Big Losers? Samsung. OUCH!! No wonder they had to buy loop. Their new wallet strategy was to have a DUAL NFC/LOOP wallet. Google just got all the SE keys for the Samsung Phones. This means that Samsung’s wallet will only work on new phones.. a rather rough place to start.  Paypal.. with the birth of a new CNP scheme this summer driving ApplePay and Google Wallet beyond Apps to mCom checkout.. Paypal has no future in Mobile…  Except in emerging markets.

More to come.. but wanted to get this out today.

Softcard to Google?

17 Janisischoice

As I tweeted Monday, it is now in mainstream press (See today’s WSJ). This has been a very poorly kept secret, as the team at ISIS talks up its suitors.. I found out from a retailer. (BTW I did not return the calls of the WSJ for this article)

My very first blog in 2009 was on ISIS (project mercury back then).Did you know Softcard started as a joint venture between GE, Walmart and ATT!?  Selecting Discover and Barclays as the primary network/issuer to deliver value to retailers (Dekkers was lead at Barclays now CEO of MCX, Abbott was lead at GE now CEO of Softcard). There wasn’t much of a business case for the MNOs (50bps Discover card) so they brought in the mainstream networks, and realized that there still wasn’t a value proposition.. and started charging BANKS $1M a pop for the RIGHT to have their cards in the wallet (leaving 3 willing issuers today). Walmart left after the MNOs moved away from DFS/Barclays (and began planning MCX).

Hard to believe change can happen so quickly.  Just 4 years ago, the carriers wanted $3-4 Billion for the “rights” to NFC, now ISIS is going for around $60M. A price that more closely aligns the real value of NFC in an Apple, Token and Android HCE world.

SOOO many lessons learned, so many funny stories.  How could any company drive enough revenue to support a 12 party supply chain in payments (see blog)? See my “value prop” slide from 2009. Do you see anything that didn’t quite pan out? The WHOLE thing!!Mercury Value Proposition

I’m working on my 2015 predictions, one will be that we have come to a tipping point of … wait for it… COLLABORATION. Yes big companies WORKING with one another. Too much capital has been burned trying to go it alone. No one company can compete against Apple, Google, Amazon… Of course I’m betting on this with CommerceSignals

Look at the Google deal for Softcard (if rumors are true) as Google working to create a starting point for collaboration in payments. I don’t know if softcard is that right vehicle for that.. If Google is buyer, they will throw all of the technology away in days after acquisition.. I have some other very firm views here on why this all makes sense.. but don’t want to share now until deal is finalized.

Here are a few of my old blogs..

ISIS Platform: Ecosystem or Desert

Battle of the Cloud – Part 2

ISIS National Launch

NFC – ISIS has 12 months… (Oct 2011.. I was wrong by 24 months)

ISIS: Antonym of Nimble?

Software Secure Element – HCE Breaks the MNO NFC Lock

NFC and Consumer Choice



What do Retailers Want in Mobile?

1 Nov 2014

Money2020 is next week, and I’m moderating the ApplePay session on Tuesday at 5pm… hope you guys can come. I’m more than a little sad that I can’t get any retailers up on stage with me. Why? The top 60 retailers are in MCX, and it makes little sense for them to get on stage and tell the world what they are NOT going to do and why. As I’m preparing to leave for Las Vegas tomorrow, was thinking “what could I write about? What unique perspective can I offer?” Well given I can’t get them on stage with me, let me try to articulate the Retailer’s view of the world. My twitter feed is blowing up as I work to explain why CVS and Rite-Aide turned off NFC. Please know I’m only trying to give perspective…

Payment Services are a brokering activity between two entities engaged in commerce. Logically, a broker must have the trust of both parties, and deliver some sort of value in managing the financial risk associated with the transaction.  Within Consumer Retail, Visa and Mastercard evolved from Bank owned exclusive networks of the 1960s (see History) to ubiquitous independent payment networks. Few remember that back in the 1960s, merchants took either Visa or Mastercharge but not both as the Merchant’s acquiring bank could only be a member of one of the networks. For merchants, the value proposition was clear: consumer credit.

Payment networks thus evolved from a closed and focused value proposition, to a settlement “infrastructure”. However the rules and governance process by which many parties (merchant, acquirer, processor, issuer, network, VASP, …etc) participated in defining operation of this “brokering” activity did not evolve. This is the central issue restricting the future growth of Visa and Mastercard. One I believe both are acting on. My firm belief is that rebalancing network rules will unleash a massive new phase of value creation for these networks.

Let me take a quick side bar here..

Network Theory – Openness

As I’ve stated many times, closed networks always precede open networks until scale is reached (Building Networks and “Openness”, 2011). Weak Links (nodal affinity) influences network creation, and there are VERY few open networks which exist in Nature. This is logical as Networks form around a function rendering generic open networks less “efficient” than specialized networks around any given specialized need.

Scale-free distribution (completely open networks) is not always the optimal solution to the requirement of cost efficiency. .. in small world networks, building and maintaining links between network elements requires energy…. [in a world with limited resources] a transition will occur toward a star network [pg 75] where one of a very few mega hubs will dominate the whole system. The star network resembles dictatorships in social networks.

-Weak Links

Networks NATURALLY form around a function and other entities are attracted to this network (affinity) because of the function of both the central orchestrator and the other participants. Open networks (internet/TCPIP, Visa, NASDAQ, … ) succeed where a common infrastructure benefits MANY NETWORKS.

Visa and MasterCard have transitioned to become common network infrastructure, a position FAR MORE valuable than that of a closed credit delivery system. They are a network of networks. However their rule making and governance processes do not match the other open networks listed above (NASDAQ, Internet, …). Most Banks, have also lost their traditional role of “brokering” and risk management (in retail) by creating a card rewards system that encourages card use paid by the merchant. This creates a brokering incentive separate from the commercial transaction… impacting brokering independence.

What do merchants want? A neutral broker!!

A top 5 merchant told me a few months ago “Retailers like Starbucks have proven that we are best placed to deliver value and influence consumer behavior. I don’t want to force my consumers to do anything, but similarly I want to networks that let me play on an even field. These next 5 years are going to be complete chaos for consumers. What do we want them to do? Swipe, dip, chip, pin, tap, QR…? We have been planning for EMV for 3 years… am I really supposed to jump to Apple in 4 weeks?”


These guys are good friends of mine, and I think their business vision is well placed. They want a network where they can play on an equal footing. A neutral broker.. or at least one where they can have a seat at the table when rules are set. Will MCX be a massive success? It depends on the consumer value proposition. Are the merchants motivated to work together in creating a neutral broker? Hell yes.

One merchant said it this way “Tom I didn’t think we would ever have someone more difficult to work with than Visa and Mastercard, but I was WRONG. Apple is a nightmare! At least we knew what was coming with Visa and Mastercard, with Apple they don’t talk to us, respond to our letters, or offer any kind of value proposition. Why on earth would I want to let another brand in my store without understanding what it will do for me? They are a great company, with great products, and certainly have a much better approach to data than Google.. but anonymity is NOT a value proposition, in fact Apple makes our efforts to deliver value to the consumer even harder as we have no defined way of using Apple to engage our consumers”. See Brokering Identity – Part 1, ApplePay and Merchants, Digital Transactions ApplePay Issuer Agreement.

Getting a card number from consumer to merchant is NOT innovation. There is just no problem here. My payment friends are already rolling their eyes. Apple does have great security and great ability to manage fraud.. but fraud losses for CP are 3.2 bps. What about store data losses? That is not “fraud”, and certainly a problem for merchants that keep PANs. Tokens do solve this problem… but so does better security, and more intelligent approach to tracking loyalty. Apple must move to create a merchant value proposition, and define how they will help with consumer engagement. I believe Google will far outpace Apple here.

Retail is a zero sum game.. I’m not going to buy MORE gas and groceries.. differentiation is about switching, product selection and pricing on data, ..the fluxonce this flux dies.. steady state resumes.  Perhaps all iPhone owners will only shop at whole foods, but data shows that consumers don’t make decisions this way. In fact payment is not in the top 5 reasons for consumers choosing a new iPhone.

Why are MCX merchants turning off NFC? To give themselves a little breathing room, make Apple create a merchant value proposition (engagement), get a seat at the table in a new network, and help to establish a consumer behavior that works for them too (Most Important Payment Race: Consumer Behavior, Apple’s Platform Strategy: Consumer Champion ).

What do Retailers want in Mobile?

Following from my big blog Static Strategies and the Rewiring of Retail.

  • Consumer Engagement
  • Consumer Acquisition
  • Consumer Loyalty
  • Allow Retailer to be in control of data
  • Partners that allow Store’s brand front and center
  • A Partner either IN CONTROL of the consumer experience (Apple/Google) or one that already has massive consumer adoption (ie Facebook).
  • Creating a fantastic customer experience from end-end
  • Ability to manage campaigns, data or your business
  • A Partner that can reach/influence consumers WHERE THEY ARE.. not where you want them to be.
  • Payment..? I guess if that comes too… 

shopper marketing

How will this play out?

  • Much has been made of the MCX contract provisions that prohibit participating retailers from allowing other forms of mobile payment. This is just not accurate. Any retailer can choose to turn on NFC, any retailer can sign up for MCX. Can an MCX retailer turn on NFC? Yep.. Large retailers are not participating in ApplePay because Apple has completely failed in a merchant strategy, they have not articulated one, nor have they worked directly with merchants. This is really no different than Apple’s failure to work with Banks. Banks are just fuming over the take it or leave it terms Apple offered to them. Merchants had no terms…
  • Apple will rollout a merchant friendly beacon product, and loyalty product for consumer engagement in next 6-9 months, this will also include a renewed focus on BLE. The product will fall flat until they can create an new merchant organization. Google has 4,000 sales people working with merchants, apple has around 16… so it is a big task.
  • Apple will ROCK in App payments.. it will be their homerun… I will make a further bet: Apple will WIN in every situation where they can control the consumer experience from beginning to end.
  • Visa and Mastercard are beginning a shift toward the merchant. They may not win the top 60, but Visa has 36M merchants.. that leaves 35,990,940 that will be open to new ideas. These are my biggest personal holdings, and I know both of the CEOs. Everything I’ve written here they know already.
  • Consumer authentication is VERY disruptive to retail and banking. As Ross Anderson said “if you solve for authentication in payments.. everything else is just accounting”. The need for an independent broker and their services are dramatically different if either the consumer or payment can be authenticated (ie cash, bitcoin). Why do you need a payment product at all? Just present the identity to the bank. This is what Sofort/Klarna does… Why not do this? Because the banks have no ability to MONETIZE the transaction (no merchant agreement). There are many better ways to leverage authentication, but no other ways to currently MONITIZE IT (outside card). Perfect Authentication… A Nightmare?
  • Apple is pursuing an “anti-google” approach: keep no data, closed platform, control everything. Google is 2-4 years behind on platform security.. but is catching up. The Google platform is much easier to build in and control (ex HCE), but consumer adoption lags as each Android participant must move consumer to their vision. Apple has successfully delivered security and authentication, but has not laid out a way for many apps to leverage it. Retail is a REALLY big business, with 1000s of specialists. It cannot be throttled by one company.. thus Apple will work fantastically in environment it can control. (sorry to restate).
  • ApplePay and overall contactless adoption will begin with small merchants and infrequent purchases. Most phones have the capability today. MCX will not stop contactless.. but it will impact consumer behavior substantially

ApplePay Vs Google

  • Is NFC/Contactless Acceptance required as part of EMV rollout? NO!!  This is the most widely held mis-understanding. While the large terminal manufacturers have no products in their official product list without contactless, the top 60 merchants order bespoke or custom terminals to fit their needs.

ApplePay and Merchants

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.

Commerce Platform

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 recommendations

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).



iPhone 6 – Quick Thoughts

Super short blog.. will do better job tomorrow.

Wow.. Apple has just launched the greatest new consumer product since the first iPhone.. Per my blog, there is so much more to the iPhone 6 than what we saw. The iWatch was just a thing of beauty.. I think the entire presentation was a an A+ with one be fat D.  While the rest of the videos were world class works of art, the payment video was like they put it together yesterday… and we had to see it TWICE. Quite frankly it was the worst mobile payment announcement I’ve ever seen.. particularly for a feature that has been around for 7 years. It wasn’t until after the event that I read and saw that the iWatch had an SE and could do payments too.. Why didn’t they lead with that.. seriously!! my guess is that this was the primary video but got pulled for sequencing the “One More Thing”. applepay

I had a nice call with Visa, and I know the MA team as well. The network planning on the tokenization is just tremendous.. No changes to the network, using auth messages as the mechanism for Issuers to approve and bind token. Apple token assurance information in the existing card data fields.. all just fantastic stuff.  Apple is the first implementation of the new EMVCo tokenization specification. In my view this is a giant LEAP beyond EMV chip and PIN, and is now (by far) the most secure PAYMENTS scheme on the planet. (Wish Apple said this instead of showing that old lady 2 times).

What are my big payment surprises?

#1. Apple branded PAYMENTS. Where Google and ISIS have a wallet. Apple has ApplePay.. they just wrapped the card network brands. I can’t believe that anyone allowed them to do this (rebrand payments).. but this is a BIG win for Apple, particularly as they work to “enhance” NFC acceptance with an eventual move toward BLE POS processes.. Yet, do Retailers really want to introduce yet another brand in store between consumer and merchant?

#2. Miserable fail for ApplePay in merchant value proposition and merchants on board. Google had all of these merchants on board 3 years ago.. all the acceptance numbers were just the generic NFC Contactless acceptance numbers. Apple did nada to loop in merchants today, and it will cost them. They could have highlighted terrific new consumer buying experiences with beacons, and BLE, .. but we got some old lady fumbling with her wallet. They showed NOTHING new that Google, Samsung, ISIS don’t do today (and 3 yrs ago). The only new merchant I saw on the list was Disney.. and I don’t think they will drive much high frequency (behavior changing) volume. Remember, Apple doesn’t really know how to play with others very well.. they are consumers first.. everyone else .. .who cares. Not great attributes of a value orchestrator. Also I, anxious to see how the Macy’s/Nordstrom/Kohls private label cards will be accommodated in token model (Citi/ADS are key).

#3 I LOVE ApplePay online.. the target demo was the only save from a solid F. Makes complete sense.. who will help 1000s of eCommerce merchants integrate? The PR says Visa/CYBS are on board..  BIG issues for eCommerce specialists.. as this new iPhone 6 takes on authentication and fraud in a brand new way.

Where I was wrong..

  • Looks like the 15-25 bps is at the low end of 15 bps..
  • I didn’t see Apple announcing a separate secure element chip.. I’m not the smartest knife in the drawer. Thought for sure the Secure Enclave would be the place for this.. someone enlighten me.
  • No Paypal.. anywhere.. so much for my consistent G2.
  • Where are the Beacons?  I’m very confident that beacons will be used to “wake up” the payment application on launch. Don’t know why not demoed. ApplePay merchants will likely get a pack of beacons and instructions for registering them (location)

Clarification.. I never, ever said that Apple would get Card Present rates for ApplePay eCommerce.. I said it was logical for them to ask, and that the banks said no. ApplePay at the POS is a network certified card present transaction. ApplePay for eCommerce is a Card Not Present transaction. Merchant costs DO NOT change for accepting a card at the POS. It is TBD if Apple wants to put a fee on the eCommerce transaction.


Will Merchants Adapt to Apple?

Guys… There needs to be trust building, value creation, and pump priming for this to take off. Merchants have to understand the value to them before jumping on board.. and anonymity… its not a great merchant value proposition.  Google was in a place TO PAY MCX to TAKE GOOGLE WALLET.. that’s right.. google had pitched an idea that would have brought all card acceptance costs to ZERO (as opposed to the full 180-240bps for ApplePay).. the merchants STILL DID NOT WANT Google to do it..  I’m telling you the story to help you realize how GIANT the merchant acceptance problem is. Can it be fixed? yep.. but it is a 5-10 year thing..

I don’t see any scenario where there is a fast start to contactless in the US, not without billions of investment in helping retailers build a platform to interact with the consumer.

I do think all handsets will have it (go buy NXP) and I see contactless winning at the periphery (coke machines, QSR, convenience). Why is it working in Europe? Their banks jumped on the EMV bandwagon long ago… interchange rates are more tightly regulated, and debit is accommodated more broadly (less merchant resistance).


  • Bring Apple Pay to Merchants..
  • Help retailers construct consumer engagement experiences with the iPhone 6
  • …?


iPhone 6 – Payment Update – Sept 2014

Super short post that summarized my 20 odd tweets this week. Frequent readers should skip to last section “New G2”

Feel 100% comfortable with my March Predictions iPhone 6 – Payment Predictions, only thing I missed was release date (September 9th… not October).

Looks like Apple got squeezed into the bank box. As I related in Apple… Payment via BLE/Beacons will still happen (but when is issue) Apple wanted to launch the payment product with BLE (not NFC) but existing payment networks didn’t want to cause merchant chaos in fragmentation of acceptance infrastructure.. so pushed apple back into the NFC mold.  The payment experience is as I outlined in May Apple iBeacon Payment Experience. I don’t see ereciepts as part of launch.

Also confident in my predictions that Visa and MA are running the TSP (see iPhone 6 – Payment Predictions)


  1. Consumer walks up to cash register, a payment terminal beacon provides information to Apple payment application that it is close proximity to payment terminal ID xxxxx (TID),
  2. Merchant scans goods for purchase. No mobile processing of loyalty, coupon, discount information
  3. Merchant payment terminal cannot send total amount due since it does not have Apple handset information/UUID. So how will Apple do it? My guess is Apple will provide UUID to the Payment Terminal via BLE at application wake up to perform a “lite” checkin with payment terminal. Good news is that there would be no data connectivity requirements, but it requires a new payment terminal… For everyone else.. there is no total amount due (99% at launch).
  4. Legacy NFC. At application wake up,  phone asks “pay merchant with Apple wallet”?
  5. Consumer validates transaction with fingerprint biometric
  6. Consumer taps phone (NFC) and Card token presented Payment Terminal via NFC Merchant processor routes token to payment network which translates and routes to bank for authorization
  7. Payment is authorized (as happens today).


  • Launch customers in payment likely to include Macy’s and Nordstrom
  • Apple will also likely launch with Starwood Hotels for hotel room door key provisioning (as I tweeted last week)
  • Apple was able to get 15-25bps from top 5 issuers (JPM, C, COF, BAC, Amex). These are the only issuers that will work at launch. As part of this fee, Apple will release token assurance information (see Token Assurance – Updated)
  • Apple will also launch an eCommerce/mCommerce buy button in EasyPay. This will NOT receive any card present or preferential rate. This is less a function of in App purchases and more a function of 3rd party ecommerce sites having a EasyPay button for fast IOS checkout. Will in App purchases have this as well? Good question, seems logical
  • The following cards are provisioned into Apple’s secure enclave at time of manufacture/OS loading: Visa Debit, Visa Credit, MA Debit, MA Credit, Amex, China Union Pay.  (NO DISCOVER)


  • What will apple do for all the iTunes cards not from one of the top 5 issuers. That will be a rude experience. How will they enroll 3000+ issuers into this scheme and get each one to cough up 25bps
  • What is pricing on debit. Technically everyone will support debit, but no one is incented to make it work.
  • Don’t know how Paypal will run in this model.. so this is a mystery, particularly with launch of EasyPay.. will Paypal be a whitelabel here? I am confident that Paypal will be part of launch.. what I don’t know is how..
  • How will Apple ensure they get 25bps from the banks, they have no insight into the transaction.. the card is presented and that is the last Apple sees of it. This has been a problem for other wallets as well. It is one reason why google created the proxy card.. to see all the transactions.

Updates Sept 8

  • Enrollment, looks like Banks will be supporting a BarclayCard/Google Wallet like enrollment process from within online banking.. This is very, very smart.
  • Bank of America, Citi and Wells are all rumored to be supporting Debit card inclusion in Apple wallet day one..



Paypal at Crossroads (? buying Blackhawk)

25 June

Big things are in store for my favorite eCommerce payments company. Really, I do like Paypal. I may ding them on their POS strategy… as it makes no sense at all… but I love Paypal online.. the “original” ecommerce payments solution that adds value to merchant and consumer. In 98/99 Thiel and Levchin were the first to dream up digital wallets, and first to solve a REAL problem of card acceptance online for small retailers. Perhaps even better than the great Paypal PRODUCTS, were the great PEOPLE that grew out of PayPal.. that have done soooo many great things: Peter Theil, Max Levchin, Elon Musk, Keith Rabois, Premal Shah, Osama Bedier, Amy Klement, Steve Chen, .. (list too long sorry to those I left off).

As its early leaders went on to do great things, the company “evolved” from an innovative start up to take on a bank flavor. Scott Thompson came from Visa and all his direct reports had bank backgrounds… the top tier of the organization led to a culture change (in a bad way) and it went from the coolest company in the valley… to … errrr… something else.  Pierre and the BOD recognized this and tried to get the mojo back with putting David Marcus in at the helm. They wanted to recapture what made Paypal great (people).. to reset the culture. David is a great guy, as he says this week he was an innovator.. but one that never ran a team larger than 200.. and certainly not a global one which was highly regulated.  It didn’t help that eBay’s CEO essentially undercut David by allowing Don Kingsborough and Gary Marino end run and make decisions directly with John. How could any CEO make it in that kind of environment!?

Now that David is gone (see Venture Beat) who can lead them (today) and what is their new strategic imperative.. their vision for growth beyond eCommerce?

Next 12 months

I believe Paypal will see competition in its core business like never before, As I stated previous Payments are moving into the OS… and Paypal doesn’t have one. Apple, Amazon, Google are new competitors in core eCommerce… all with an OS.

Paypal’s new competitors?

  • Apple will own payment presentment and authentication on all iOS devices.
  • Amazon will begin to get off Amazon traction (example today is Gogo wireles)
  • Google’s massive success in Shopping Express (Free shipping and payments). Google also just launched wallet in iOS (see google’s blog)
  • Bank Token Schemes and forthcoming rules for cards on file

As a side note, Paypal did squeeze itself into the Apple wallet (for NFC/POS transactions), but Apple will be expanding the iTunes buying experience very soon, and it won’t be looking to drive Paypal merchant adoption, as it is in the process of negotiating card present rates for CNP transactions (See my Apple blog).

Paypal at the POS is a complete joke (see blog). The business guys that have been running the show (or end running David) are focused on a Visa/Mastercard like strategy… not on one that delivers value to their core constituents (merchants and consumers).  Paypal was the company best positioned to execute on a Braintree/Stripe product 5 years ago (remember and also the best company to have built a Square/Clover like solution. They missed all these things because their business heads were focused on quick transaction volume deals and solutions.. NOT ON VALUE.

POS – Buying Blackhawk?

This is my big theory today. With eBay repatriating $9B and taking a 30% tax hit, we all know that acquisitions are planned. But what?

Obviously Carl Icann, David Marcus and the BOD have had some disagreements. Rather than guess the strategy, lets take a look at WHO is staying at Paypal. Don Kingsborogh is the former CEO of Blackhawk and head of Paypal’s POS strategy, and Discover Network strategy/relationship.

Paypal has promised its institutional investors progress at the POS.. and they have NONE. Jamba Juice and Home Depot numbers are terrible. The Discover partnership did nothing for them, as MCX merchants REFUSED to accept Paypal (routed as a Discover Card) or new processor agreements (that ran as high as 210 bps). Paypal has “learned” it cannot sneak in payment products within an existing network (Discover), nor can it deliver enough value to push merchants toward a new agreement. Few eBay investors realize that the Discover relationship is yielding NO FRUIT.  Even IF they could convince a merchant to TRY paypal at POS.. they first have to line up the Processors to support, and big ones like First Data were not playing (WSJ Article). This Paypal was paying $50k-$250k+ for merchant to SWITCH to Vantiv just to do a pilot.

Paypal at POS needs a ubiquitous merchant acceptance solution and a physical connection to all major merchants. They also have learned how both Google and Apple have developed strategies to end run the traditional payment terminal and integrate directly with the POS (see the brilliant Google/TXvia Patent US 8676709 B2. )

Blackhawk may fit the bill, as it has a merchant network and POS integration solution today. Every time you pull one of those pre-paid cards off the shelf the SKU bar code is tied to the card Primary Account Number.  The Retailer’s POS system sends the SKU to Blackhawk upon payment and Blackhawk activates the card.

Blackhawk is working to leverage this transaction flow to create its own scheme to fund the transaction.See Blackhawk’s patent US8676709 B2. An item in the shopping card becomes a payment instrument. This could be “THE” enabler to someone like Apple too.. a new payment “gateway” that end runs the traditional payment stream. For Apple, all they would have to do is get a secure “TOKEN SKU” to the POS and the POS would leverage Blackhawk to route. Of course items in a basket usually have a cost, but settlement could be accomplished through a 100% discount, or by capturing the merchant ID and terminal ID to push the payment back through their current processor.

I think this is THE most brilliant scheme EVER!! I love it.. If implemented via ACH.. and MCX. I just don’t love Paypal delivering it because of “cost” and ability to coordinate/execute in delivering value from  all merchant data.

I’m only 50% confident here.. just put a small $10k bet along these lines for fun.  But at a $1.4B market cap.. this would not be a bad bet for PayPal.. problem is that merchants will never go for it.. this does NOT solve the VALUE problem (for consumers or retailers).. it only solves the network acceptance problem. This approach continues the “we will sneak it in” approach. It may “solve” a short term problem of Processors.. but it creates a new one for the merchant in having to deal with multiple processors (one for swipe one for … something else).

IF the merchants would go for this, it may be the best payment design on the planet.. as it would give a way to provide discounts and rebates within the POS system. Integrating with the POS would completely disrupt the processor/payment terminal process, and we would begin to realize the “power of tokens”.

Tokens and Card Not Present

30 May

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.


Secure Element, NFC, HCE, EMV, Tokens and Cards

7 May 2014

This blog is for my non-techie, non payment friends.. helping to make sense of all these acronyms.. experts may want to pass on this one.

The GSMA/NFC community is quite stirred up at the moment. This is quite understandable…  after all they spent 8 years perfecting their vision of NFC only to have it thrown under the bus by Apple and Google. I’m not knowledgeable enough to go into the depths of the protocol, or EMVco 4.3 Book 3. I’m giving the quasi technical business explanation of what is going on. There is room for disagreement here, as there is substantial interpretation, as well as understanding of what is REALLY happening vs the specifications.  Remember this is not my day job… so your comments/corrections are welcome. By far the most useful reference/summary page I have found online is located here

It’s easiest for me to explain all of this in the context of an example. Credit cards are the easiest example as they are in the market today, with a few different implementations of contactless and touch the areas above.EMV


EMVco has a contactless specification which I challenge any non-techie to read. For this short blog, the key point I wanted to make is that the Credit card number (PAN) is given to the POS unencrypted, in the clear. That’s right… don’t believe me? See:

Your next question is probably “Where is the security?” the answer is that that along with the card information, the device sends a cryptogram that is uniquely signed. In other words there is a digital payload that rides along with this credit card primary account number (PAN). This digital payload uniquely identifies the device that EMULATED THE CARD. Think about is as someone validating your SIGNATURE on the document with your social security number on it… Your number is there.. but they make sure it is you by validating the signature.

So why is the SIMAlliance extolling the virtues of a Trusted Execution Environment (TEE) and SIM/UICC? After all we seem to live without this capability quite well in the PC world. Mobile operators want the ability to SIGN and AUTHORIZE more than access to mobile towers. That SIM card in your GSM phone signs and authorizes access to the mobile network, much as MNOs envisioned doing for payments. That is how the GSMA’s version of NFC evolved.. “hey we do this for network access.. lets do it for payments”.  To be clear there is nothing technically wrong with the GSMA NFC approach.. it is beautiful… but there are substantial business model issues (see Payments part of the OS).

Apple and Google are both moving aggressively to act as Commerce Orchestrators as handsets become commodities and data moves to cloud, enabling the mobile phone to be the key services platform at the confluence of the virtual and physical world is critical. It is not about payment. Authentication is core to this orchestration role.. authentication is not something that can be given away to MNOs or to Banks.


It makes most sense to jump to TOKENS now.  You can imagine that Banks don’t exactly like having their card numbers sent in the clear. In fairness they were involved in the specification, but the EMVCo contactless model is essentially a card number plus authentication. There is more than one way to achieve this, and improve on it by hiding  the PAN… this is what tokens are (a few examples described in Money 2020: Tokens and Networks, Apple’s Plans and Google/TXVIA).token

Tokens are not new (see Tokens… 10 Approaches). However Tokens are now an official EMVCo specification as of March 2014, with the major issue of Token Assurance outstanding. In this token model, the issuer chooses at Token Service Provider (or does it themselves) and creates a number to replace the PAN. This takes your PAN out of the open… and makes it useless. To be used the Token must be presented by the right party, with the right assurance information. All of this aligns VERY WELL to how banks and networks work today, which is why it is so popular (see blog on HCE).  In the GSMA NFC model, the a cryptogram goes along with a PAN in the clear with the PAN stored in the phone in a secure element.  In the token/HCE model a Token representing the card is stored in a less secure space, and presented with device and network information for translation by the TSP to the actual PAN. There are substantial Business Implications of Payment Tokens (blog) which I won’t go through again here, but clearly it cuts the mobile operator out of the “signing” role and they become dumb pipes.

My Gemalto friends will howl at how unsecure this is, or how it won’t work if the device has no network access. They are wrong. It is working today, and is secure enough. There is no connectivity requirement, that software token in the phone can change every 10 seconds, 10 minutes or 10 days. The TSP and Issuer can decide whether or not to accept an “old” token based upon the transaction. In other words the intelligence sits IN THE NETWORK.. NOT IN THE PHONE. This is why V/MA/AMEX love it so much. It cements their position (See Perfect Authentication… A Nightmare for Banks?)

Host Card Emulation

emvco token

This is an Android construct (see Software Secure Element – HCE Breaks the MNO NFC Lock) that allows any application to access the NFC Radio. Without Tokens, HCE would be useless for payments, as payment information can’t be securely maintained without an SE.  Think of HCE as dependent on tokens, now a card emulation application can be certified to run outside the secure element.  I don’t like to put Apple in the HCE boat, as they have a proprietary secure architecture using tokens. This is a uniquely apple construct where the networks seem to have certified Apple’s card emulation application(s) as well. It is important to note that they use none of the GSMA’s architecture (to my knowledge) and have embedded the TEE in the apple processor (see Apple Insiders note on Secure Enclave and Authentication in Value Nets).

Secure Element

Is it needed? Certainly it is needed for at least 2 functions: Mobile network access (SIM/UICC) and Biometrics. Fingers and Eyes are very hard to reissue.. so the actual information must be highly protected. Apple is handling biometrics in the A7 Secure Enclave (oddly enough has the same “SE” acronym) and Google is a tad bit behind but handling in ARM’s trustzone. Trust zone is largely a hardware construct, and much is made of Gemalto’s marketing announcement here. My view is that there are many more than on software solution for ARM.. and ARM is much more tied to Google and OEMs than Gemalto.

The “big news” here is that both Google and Apple are EMBEDDING SEs in their hardware architecture. Embedded SEs are a threat to Mobile Operators and their preferred Single Wire Protocol architecture. As you can imagine, an embedded SE has all the capabilities of the SE within that micro-SIM card.. and sets up the prospect for a Virtualized SIM (no more of those GSM cards popping into your phone). If the SIM can be virtualized you can switch your network provider anytime you want.. or have them bid for your phone call ( see Carriers as dumb pipes? , Who do you Trust?, Also see Apples patents on Virtualized SIM). To be clear, I believe MNOs can take a leadership position in Emerging markets and payments, but for POS Payments in OECD 20 markets it makes most sense for them to focus on the $5B KYC/Authentication/Fraud opportunity (NOT payments).

OK… now you can shoot me… Open to feedback.



Apple… Payment via BLE/Beacons will still happen (but when is issue)

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).