Quick Take – Apple/Mobeewave and Acceptance

My belief is that Mobeewave will be the equivalent of a NFC/EMV certified “toll collector”

Turns out my rumor was well founded as Bloomberg verified this weekend. As such I thought I would give my view on what Apple will do with the asset.

The broad theme.. Specialized Hardware ALWAYS gives way to software.

Quick Take

  • Apple will make accepting cards as easy as using a card. They are likely to take on the role of a platform for acceptance. Acceptance requires tightly controlled and certified software and hardware. Thus it is also likely Apple will develop an app ecosystem for acceptance that expands on the “controlled” app with many 3rd party applications, and will also enable a physical acceptance device (ie dongle) to support acceptance of any card.
  • To enable card acceptance on mobile devices, the acceptance infrastructure must work within Secure Enclave (iOS) or the Secure Element (Andriod).
  • Apple does not publish, support or enable any third party operation in the enclave. Thus any card acceptance platform must be “inside the tent” with Apple’s software infrastructure. This is why Mobeewave was focused on Android and Samsung (openness).  
  • For card acceptance on IOS, in addition to enclave integration, the acceptance platform must be certified by both networks (V, MA, Amex, CUP, …) AND the acquirers (FIS, FISV, GPN, …etc). See Trust Networks.
  • My belief is that Mobeewave will be the equivalent of a NFC/EMV certified “toll collector” for interaction with the enclave. Apple will enable MANY 3rd party applications to build around their platform. This approach directly attack’s square’s vision of merchant ecosystem centered around their hardware.
  • Apple currently takes 15bps of all Apple Pay transactions (in US) per issuer agreement. It is likely to also seek a similar transaction fee from acquirers for acceptance. Note: processor take is 20-30bps vs 220 bps for issuer.
  • Apple’s goal is to create great customer experiences, particularly for device to device payment (see blog). Enabling 100s of “app creators” to build value from this central service could be a $50-100B revenue opportunity if Apple is able to capture 10% of US market. The likely initial focus is small business.
  • Key hurdles are on areas outside of Apple’s control: 1) Device/Software certification, 2) Acquirer/Processor automation of new merchant accounts.
  • Estimated timeline? Testing in 5-9 months, Certification in 12-18mo, Rollout in 18-24mo
  • Impacts
    • Positive. Visa/MA merchant network expansion + Cash Replacement. Acquirers/Processors, new platform provider (with TBD cost). Other Fintech’s in this space: Poynt, Toast, MagicCube.
    • Negative. Square.

Example – Stripe or Shopify expansion into the POS. Apple’s approach here would enable Stripe or Shopify to deliver omni channel and expand into the POS game with minimal additional investment. Either would be able to deliver integrated payment acceptance through IOS devices and create apps that are centered around their own unique platforms. Apple’s value? Solve device certification and merchant account creation – globally.

A more detailed blog on topic will be coming out next week. I’m a tad slammed today.

Rumor: Apple buys Mobeewave

Rumor only. Apple has entered the POS game with purchase of Mobeewave.

This is just a rumor.. but when you hear it often I give it a tad more credence.

It would seem Apple is entering the POS game.. Over the last 5 years they have looked at Stripe, Square and others.. but couldn’t make sense of the “hands on” merchant relationships.. perhaps they don’t want to add a sales team or manage payment ops. If that is the case Mobeewave is an amazing company with a solution that makes any phone a POS with just an App. Rather than getting an issuers permission to add a card to your wallet, it would require a merchant bank to create an account to allow for acceptance (I’m sure all acquirers will be calling Apple today).

Apple’s services revenue hit another record in yesterday’s earnings.. merchant acquiring would be new area for growth.. The opportunity: enabling acquirer to add merchants as easily as issuers add consumers. Small merchants would seem to be the best path for attack.

Who is impacted? This is a short blog, so here is my short list

  1. Square. Wow… now competing against Apple.
  2. Samsung. An investor in Mobeewave.. now without an outlet for making Samsung phones the next POS
  3. SMB acquirers. Making payment acceptance an app on an existing device may be the closest thing to creating an “alipay” in the US. If Apple can make pricing simple, and merchant banks can accelerate underwriting, they can make this a fantastic growth service.
  4. Fintech, specialty acceptance. The remaining players (ex Toast and Poynt) will now be in play.
  5. V/MA. They should love this.. it helps anyone become a merchant.. and adds volume to the network.

My firm belief is that Apple is best positioned to create GREAT experiences. This is much more than payment acceptance. Just as Paypal recognizes the need for QR code to transmit more than just payment information (yesterday’s earnings call), Apple can bring Mobeewave into the tent (within the secure enclave) to process identity, loyalty, rebates, rewards and coupons. Remember that Apple chose NOT to enable contactless on their Apple Card.. they want consumer behavior to be device to devices.. this is a very logical step for them (see previous blog on Brokering Identity).

I’m not going to waste much more time on this rumor.. but this is a monster with important implications. For my long time readers.. remember I was almost 2 years off in my estimate for ApplePay launch.. so it may take a little time.

For me… I’m busy buying some more Apple stock. This is genius.