“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
Drop Labs
Drop Labs – Skating to where the puck's going to be.
Category Archives: Mobile Payments
Why do Merchants hate NFC?
Through all the rather “invented conflict” of MCX vs Apple Pay by the tech media these last few weeks – very little diligence was done on why merchants have come to reject NFC as the standard of choice. Maybe I can provide some color here – both as to why traditionally merchants have viewed this channel with suspicion leading up to CurrenC choosing QR, and why I believe its time for merchants to give up hating on a radio. Typing this up on my iPad, so excuse any lack of editing on this one.
Why do merchants hate NFC? Continue reading
Apple Pay: First Observations And Closing Thoughts
If rumors hold true, Apple Pay will launch in a week. Five of my last six posts had covered Apple’s likely and actual strategy in payments & commerce, and the rich tapestry of control, convenience, user experience, security and applied cryptography that constitutes as the backdrop. What follows is a summation of my views – with a couple of observations from having seen the Apple Pay payment experience up close. About three years ago – I published a similar commentary on Google Wallet that for kicks, you can find here. I hope what follows is a balanced perspective, as I try to cut through some FUD, provide some commentary on the payment experience, and offer up some predictions that are worth the price you pay to read my blog. Continue reading
From Chip to NFC: A necessary evolution
Consider this: Over its Sept 19th launch weekend, Apple has effectively shipped over 10 million EMV cards. Maybe these weren’t actual cards – rather, containers that could end up being a host to over 80M issuer cards eligible for Apple Pay. So how many among those will knock on a retailer’s door at launch? Initial device sales are to a loyal fan base. Should be easy to guess. Should be easy to spot too, as the aggregate NFC payment volume in US has never been more than a whimper. Continue reading
The Bullet that you dodged: Apple Pay and CNP
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
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
Apple in Payments: Bluetooth Edition
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
Apple in Payments – A Disruptor’s dilemma
This post is an attempt to look beyond what the presence or absence of any specific radio in iPhone6 may mean to Apple’s intent in Payments and instead – provide some color around three things that are part of this debate: a) Bring 800M credit cards on file in perspective b) Address the question of radios on the device – a topic that has a disproportionate share of the debate and finally c) Consideration of steps made by Apple to secure both iOS and its devices as waypoints in its payments journey. Oh wait, that last one is not part of the Apple payments debate today. I believe it should be. Read on to see why. Continue reading
Tokens and Traditionalists
Two recent comments led to this post. One is by David Marcus of Paypal who long held fast to his belief that NFC based payments had high barriers to entry – cost, complexity while offering very little upside. Paypal’s position on NFC (Not For Commerce) had always been a bit zealous – understandable as in a world of Secure Elements – Paypal (and many others) could not meaningfully participate. But Marcus’s recent post is an attempt to view NFC/HCE as one of the three trends that could transform the retail payment experience – is a pragmatic view to a complex and heterogeneous retail environment. Marcus speaks on how Paypal has come to adopt a cautiously optimistic view of NFC/HCE, now that there are no gatekeepers extracting a toll and because HCE (thanks to SimplyTapp) finally offers a level playing field in the Android ecosystem. Continue reading