Apple Pay off to a good start with m-payment

Thursday 11 September 2014 | 16:14 CET | Background

Apple has announced Apple Pay, the service for retail payments with iPhone and iTunes. While NFC payment in the iPhone 6 is important, online payment is just as significant. Apple Pay will launch in the US in October, and have a broader support than other m-payment services, like Softcard and CurrentC. The fact that Apple has embraced NFC is an important stimulus for the NFC ecosystem. When & where Apple Pay will launch in Europe is not yet determined.

NFC in iPhone 6

The freshly announced iPhone 6 and iPhone 6 Plus sport an NFC antenna and embedded Secure Element that stores the sensitive data. Apple’s Watch also has NFC. That device works only in tandem with an iPhone, but it can enable NFC payment with iPhone 5’s. 

Apple released a video that shows how a contactless payment is made. A shopper authenticates payment by pressing her finger on the TouchID fingerprint sensor. Apple has integrated the antenna in the top bezel of the phone, so the top of the screen should be pointed towards the NFC scanner.

This is a subtly different user experience, but nevertheless significant. Other NFC services require that the payment is authorized in the app by entering a PIN code, after which the smartphone body must be pressed to the NFC terminal. This may be a small difference, but it may be enough to tip the favour.

Payment through iTunes

Apple proceeds all payments through iTunes. The company underlines the fact that the merchant receives no credit card data. After all, handing the credit card over brings the risk that the unique number and the security code are compromised, opening a way to fraud. The card credentials are not even stored in the phone but as a new uniqe code.

It is expected that most users who activate Apple Pay, will do so on the credit card that is already linked to iTunes. Other cards can be added.

Apple Pay will be supported by the three largest credit card networks, American Express, MasterCard and Visa and six major banks. Apple says it can target 83 pct. of all activated credit cards in the US.

TouchID for online checkout

Not only has Apple announced NFC payments for iPhone 6, but also a set of API’s and features for iOS 8. Developers can build TouchID authentication into apps – a web shop can offer payment just by touching the sensor. Apple cannot see the transaction details, the merchant cannot see what credit card is being used. Apple does not charge end users directly, nor merchants. It will likely get a transaction fee from the credit card networks or every payment, although it’s not known how much.

Carrier support for Apple Pay

Softcard is the new name for Isis. The m-commerce platform co-developed by AT&T, T-Mobile US and Verizon Wireless wants to prevent any negative association with a Middle East militant group. Isis is currently redesigning their website.

Softcard has developed an m-commerce platform that uses NFC and a SIM card based Secure Element. The service has gone live in the US. It works on selected Android phones, but also on iPhone 5, with a special case that holds the Secure Element and the antenna.

In a news release, Softcard says the announcement by Apple to support NFC is very significant and sets the stage for rapid scale adoption of mobile commerce. CEO Michael Abbott also says that they are actively working with Apple to enable Softcard on the iPhone in 2015 — using an integrated secure SIM-based hardware solution.

It is yet unclear what that solution will look like – whether Softcard and Apple Pay will sit alongside on the same handset, both Secure Elements activated and talking to the NFC antenna. Softbank is somewhat handicapped by the fact that it has agreements with American Express and certain banks, not with Visa and MasterCard.

MCX support not clear

The Merchant Customer Exchange (MCX) is an m-commerce initiative launched by a group of large retail chains, including Walmart.

MCX announced its consumer brand on 3 September, CurrentC. The app is in limited, closed trials and live services are promised for 2015.

The CurrentC cloud-based mobile wallet shows special offers, coupons and promotions from selected merchants and stores customer cards. It will enable payment, and will contain no credit card details, just like Apple Pay.

CurrentC will be a cloud-based wallet that requires an internet connection, but not much in the way of dedicated hardware. The app will generate a new QR code each time, which must be scanned at the point of sale.

MCX members Best Buy and 7-Eleven have removed all NFC scanners from their stores, GigaOM reported in April this year. While that is guaranteed to keep out Google Wallet, Softcard and Apple Pay, it remains to be seen if it is the right strategy, certainly now Softcard has decided to join Apple.

Ecosystem wars

The key movers in the m-payment ecosystem have spent the past years developing their own services, but also obstructing others. The mobile operators in Isis/Softcard have fended off Google Wallet, on Android phones no less, by keeping the Goolge’s embedded Secure Element away from access to the NFC hardware.

Last year, Google retaliated with Android 4.4, which locks out the SIM-based Secure Element by default, unless the mobile operator reaches an agreement with Google.
Some retailers are hedging their bets, but MCX strives to keep all customer relations within its own app, without using NFC.

In spite of all this, the number of stores accepting NFC has grown to over 220,000. And Apple has access to that entire footprint.

Apple Pay for other markets

Apple has said it will launch the service outside the US, but it’s not clear where & when Apple Pay will reach Europe. In the EU, NFC has been fostered by mobile operators, but also by banks issuing dual-mode debit cards. In key EU countries, NFC adoption at point of sale is rising quickly. 

Apple handles all payments through iTunes and does not really need support from mobile operators. It does need contracts with Maestro and Visa Europe, but that seems only a matter of time.

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