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 https://www.apple.com/pr/library/2014/09/09Apple-Announces-Apple-Pay.html 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
  • …?


11 thoughts on “iPhone 6 – Quick Thoughts”

  1. Enjoy your blog and agree with you, but re ApplePay v Google Wallet, I notice a comment from Eddy that ““We are not in the business of collecting your data. So, when you go to a physical location and use Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it. The transaction is between you, the merchant and your bank. It’s fast, it’s secure and it’s private.”

    Probably the difference (at physical terminals) that differentiates Apple today v Google Wallet last year? Interesting..!

  2. See you interact with Dave Birch on Twitter and followed the trail to your blog posts. Found them very informative in a way not covered elsewhere in the payments world. Thank you!

    Question: your turn of phrase “for Issuers to approve and bind token” implies the issuers are TSP? Is this the case or was it just a turn of phrase? Assume in your view Visa/MC are TSP as originally predicted? And to make sure I’d understood your other posts, am I right that there is a long term token issued at wallet load, bound to the device and TouchID, and assured on payments using provision of TouchID data? Where does the “one-time” property come in? Is that just the token bundled with the real-time TouchID assurance results?

  3. Your analysis of the recent Apple announcement is just great – thanks a lot.

    However, being a payment professional myself, I still don’t understand the payment and onboarding transaction flow in detail. How does the consumer link it’s card to the token? Apple says it provides some functionality for taking a picture of the card – in effect this is nothing new and would just take the card details and transmit them (securely) to Apple. But then? How does Apple make sure the card is really the one from the consumer? Why does Apple need to contract the issuers, when the intelligence (mapping of tokens to actual PANs) is done by the card schemes?

    1. Where have you seen that ApplePay is targeted for use on a website? I’m in the acquirer world and everything I’ve read is about in-app payment with Apple Pay– not on a website.

      Which makes perforce sense if you see Apple about selling the hardware-softwae combination (where they make money); you don’t need any Apple hardware to buy through a browser, and how much money is their to be made from enabling the payment?

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