Category Archives: Paypal

Commerce is a conversation

Last week I joined Sherri Haymond of MasterCard and Bharathi Ramavarjula of Facebook on a panel moderated by Paul Moreton, for a CapitalOne summit on Payments. When asked what was more important for the future of commerce – Sherri spoke of how security and trust is key, and I talked about how messaging has intersected with payments, (and in Wechat’s case) now intersecting with lending – with Bharathi eloquently summing it up as – “Facebook sees Commerce as a conversation”. Continue reading

Payments and Commerce Newsletter – September

This is a portion of my biweekly newsletter that I started earlier in 2015 to a small group of people that I communicate with often – a mix of Founders, Bank and Retail Execs, VCs, and others who find their work intersect with mobile and commerce. The last one to go out is pasted below, so you could see what it’s normally about: my posts, thoughts about other posts I have read, my take on interesting industry bits, and other perspectives. If anyone wants to be included in the distribution – email me at cherian(.)abraham(at)experian(.)com.

What it is -> A quick read and meant to be useful.
What it is not -> Not meant to make you buy stuff, not meant to use your email for other things. Continue reading

Key debates in payments tokenization – Cost & Control

In Payments, Tokenization has surfaced two key points of debate for financial institutions. The first has to do with bank partnerships with technology providers like Apple, Google, Samsung et al – and how these partnerships need to be equalized around the topic of cost and control. Though the fear of disintermediation isn’t new, concerns about costs, data sharing and customer privacy has received a disproportionate share of this internal debate. Following is a brief perspective on how this is further shaped within banks and the downstream impact to those who intend to wrap them. Continue reading

Dumb pipes and Wide moats: Networks and Tokens

For Apple Pay, tokenization is the process by which card information is protected and subsequently shielded from the merchant and other parties in the transaction flow – till it reaches an entity equipped to reverse the translation and submit the authorization for bank approval. With AP – this role is entirely owned by the card schemes, even though the specification put forth by EMVCo places no such stipulations and allows third party “Token Service Providers” to exist. Apple is said to have welcomed “non-card scheme TSP’s” to operate within Apple Pay for a couple of reasons – the ability to support non-payment tokens as well as a hedge against putting all its eggs in one basket. For network TSPs like V and MA – tokenization represents a real advantage that dis-incentivizes disruption, while opening their rails to far more potential than just payments. Continue reading

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Digging a wider moat: Apple shifts to loyalty

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Apple eschewed banks for a retailer focus onstage at the WWDC when it spoke to payments. I sense this is an intentional shift – now that stateside, you have support from all four networks and all the major issuers – Apple understands that it needs to shift the focus on signing up more merchants, and everything we heard today drove home that note. That includes Square’s support for NFC, as well as the announcements around Kohls, JCPenney and BJ’s. MasterCard’s MDES (opposite Visa’s VTS) is the tokenization service that has enabled these partnerships – specifically through MA’s partners such as Synchrony – their press release linked – (former GE Capital) which brought on JCPenney, Alliance Data which brought on BJ’s, and CapitalOne which enabled Kohls. Continue reading

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Smart Mouse Traps and Lazy Mice

“Building a better mousetrap merely results in smarter mice” – Charles Darwin

Credit card issuers in general have a good handle on fraud. They manage it under 10bps (i.e. losses of $0.10 or less per $100 of transactions) on transactions made with a dumb plastic card lacking any additional context. So Issuers wishing for Apple Pay fraud to fall between 2-3bps was not totally out of character, considering the protections in place by Apple and Networks to keep fraud away – including Issuer support during provisioning, NFC, Tokenization, a tamper proof Secure Element and TouchID. But fraud seems to have followed a different trajectory here. About a month post-launch, it seems like fraud has come to Apple Pay. (in one case – as high as 600bps for an issuer that I cannot name). Though what follows was written in the context of Apple Pay, much of it translates to any other competitor – irrespective of origin, scale, intent, or patron saint. Continue reading

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The Bullet that you dodged: Apple Pay and CNP

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There has been a lot of focus on the Card Present rate rebate Apple has been able to extract from the Issuers, and continue to extract from banks lining up behind networks who are signing them up for Apple Pay. Networks are finally finding use for the “Issuer Provisioning Service” they hastily put together during the lost decade (the “Isis years”). Term sheets are blunt and non-negotiable, they don’t provide a lot of clarity other than demanding absolute acquiescence. There are traditional bankers sitting in wood paneled rooms wondering – “How on earth did we get here?” “Well Ed, you finally lost control of the form factor and now all you have is borrowed time, to play in someone else’s playground!”.

But beyond the CP win, apparently Apple almost got their way with CNP transactions as well – in finally affording parity to Card Present and Card Not Present transactions through Apple Pay. And if issuers hadn’t finally rejected it – I believe there would have been ripple effects beyond Apple Pay and even mobile payments – with far reaching repercussions for traditional players. Banks and Networks don’t fully understand what it is that they just dodged. Continue reading

Apple Pay – It’s complicated…

Took a while to crystallize some thoughts on Apple Pay, and having a sore throat meant it’s time to write instead of answering another call on the topic. All in all – the launch may have been exciting or uninspiring based on who you ask. But the truth is far more complicated – once you start to understand what this entails – such as the dynamics of the Apple – Issuer relationship, economics and a deeper look in to what Apple has sought to expose and keep out. As far as who is most impacted by today – I think we can say goodbye to the TSM’s forever. Even if they hope to convince to put SIM based Secure Elements on to iPhone6 and subsequent iterations, in my opinion – Apple would prefer a competing container to store payment credentials like it would want a third tit. The second one impacted is MCX. Third would be Discover/Paypal. Infact – if you paid notice to the press releases floated in the week before the Apple Pay launch (MCX CurrentC, Paypal API) – it would have been evident that these two had no role to play alongside in the oncoming Apple Pay launch. You wouldn’t risk the wrath of Apple if you were. Continue reading

For Apple, Payments is just the middle chapter

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Despite sharing much perspective over the last few years on NFC, HCE, Tokenization and rest – I had not been an ardent fan when it came to Apple and NFC – going back to iPhone5. Simply put – it was not a scenario that made sense if you were Apple, when in my view – success depended on re-alignment of business models that have skewed towards networks and issuers over decades. Evaluating what I knew then to be true – I arrived at the belief that traditional NFC payments will find no backers in Cupertino. And thus – in the first part of my two part Apple piece – I referenced to Apple’s likely (pragmatic) approach to NFC: Continue reading

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Apple in Payments: Bluetooth Edition

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This is the Part II of my Apple in Payments take – and it’s early because of the leak last week around Apple’s MFi program. In the first half of my take, I had touched upon Apple’s program for 3rd party hardware attachment market as being significant and likely to be a key aspect of its payments approach. So below, I will cover more on the approach, how Bluetooth will be the standard of choice – not NFC, and how Apple plans to secure Bluetooth enough to be able to handle payments. Continue reading

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