Apple
did pick up a big compartment
within the financial services industry that can be potentially revolutionized
by a tech innovation almost a year ago when
it launched the Apple Pay. At the event Chief Executive Officer Tim
Cook sounded quite collaborative when he described that the magnetic stripe card payment process as
broken for its reliance on plastic cards “outdated and vulnerable magnetic
interface”, “exposed numbers”, and insecure “security codes”. The collaboration
with the existing players in the eco system as the underlying got reflected
when JP Morgan the largest card issuer in the US put a live stream
on large screens in its lobby in NY without spelling the reason detaire for such a live stream on
the day Apple pay was to be announced.
The core value of fintech that triggers
a disruption lay in an Uber like experience while dealing with their bank -
simple and interactive as customer’s best user experience is now the benchmark
for all their business interaction. Apple Pay does offer that even
as your phone is asleep or you are in the midst of something else as the image
of your default credit card appears when you get close enough to the NFC
terminal. Just a tap to pick another card in lieu of the default one. It all
ends up when you lightly put your finger on the
Touch ID sensor to approve it. What if my iPhone is lost, I just need to
suspend payments via Apple’s Find My iPhone website. Thumbprint being the
pre-condition for payment authorization a thieves shouldn’t be able to make
purchases.
What a contrast to the ‘disruptor’ who
aim to do away with the existing ecosystem -MCXs’ promoted ‘CurrentC’ which requires
the users to
unlock their phones -> open the CurrentC app -> enter another
four-digit PIN-> scan a barcode.
Retailers pay anything between 1 to 3 %
to card-issuing banks on every credit-card transaction they process as
‘interchange fees’. This is what the worlds’ second largest retailer in terms
of market capitalizations –‘Walmart’ has been fighting out so as to stall this
massive out flow. The result being MCX driven ’ CurrentC’ . CurrentC supports
debit card, pre-paid card, or store-specific credit card with the intent to
disrupt credit cards. Hackers made off with an e-mail list
of early testers. It
should be borne in mind that CurrentC stores encrypted payment information in
the cloud, and requires both a driver’s number and social security number for
identity verification .All these to be sweetened with exclusive offers, coupons
and promotions.
The first three days of availability,
Apple Pay had more than 1 million credit cards registered across 220,000
participating vendors when launched last October. By March 2015 over 800,000
Bank of America customers have loaded 1.1 million cards onto Apple Pay, while
JPMorgan Chase & Co. has said that there’s been “good growth” in the number
of cards its customers are loading. Visa Inc., the world’s biggest payments
network, said that 43 banks, representing 75 percent of volume on its U.S.
network, have enrolled to use the token system on iPhones to authenticate
purchases (http://www.bloomberg.com/news/articles/2015-03-31/apple-pay-running-into-hurdles-at-checkout-counter-survey-finds-i7x95shl).
All these in a back drop of NFC contact being
blocked for Apple Pay across the MCX consortium. Potential Apple Pay users is
about 14.4 million given the fact that only 18 % of iPhone
are iPhone 6 and above with over 7 million store in the US .The biggest fillip
being announcement by Best Buy to join the Apple Pay bandwagon. Best Buy is a
notable member of the MCX consortium.Apart from getting operational in the UK
and all set to be in Canada in few days from now Apple is speculated to be
making its China foray as Cupertino has already registered an entity within the
Shanghai free-trade zone that will be charged with coordinating Apple Pay
called Apple Technology Service Shanghai Ltd.
Two things Apple Pay notably lacks are automatic
coupon redemption and loyalty rewards besides fraud. Some issuers have found
that up to 8 percent of Apple Pay transactions were fraudulent, compared with
0.1 percent on traditional payments cards, said Julie Conroy, an analyst at
Aite Group. With the frauds happening at the
registration stage with criminals typing stolen credit-card numbers into Apple
Pay and trying to make purchases with their iPhones.
On
their part in the partner banks have made changes in how they activate
customers’ credit-card accounts. In a reciprocated move Banks are offering a lower rate to apple
for transactions they normally accept from credit card transactions they expecting
that they will make up for the lower rates by processing new types of
transactions that are currently being done with cash or other payment methods. Credit
card fees being charged to hedge against fraud will possibly come down as apple
deploys finger print signature. Automatic coupon redemption and loyalty rewards
is being worked upon by Android Pay. Apple incorporating the feature in future
is a realistic expectation.
Samsung
also has potential with its forthcoming Samsung Pay feature
as it uses both magnetic and NFC technology. So also Android Pay whose users
will be north of 1 million outlets in U.S. locations and in over 1,000 apps.
Both trying to leverage the ecosystem is yet another addition to the
collaborative model.
MCX
does have its challenges but with Walmart backing time will tell which weighs
more ‘disruption’ or ‘collaboration’.
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