Page 72 - Pay Magazine s2014

digital money
The Apple Pay Effect
relatively easy way to expand their customers’ m-payments options and lock in their loyalty to preferred payment cards stored in their phones. JPMorgan Chase at a February 2015 forum for investors said Apple Pay was drawing many younger, higher-income consum-
ers paying with credit cards. U.S. banks reportedly agreed to pay Apple a fee of 0.15 percent, or
15 cents on a $100 transaction,
to participate in Apple Pay, a toll they tolerated in exchange for the access and security it promised, observers suggest. Visa, Master- Card, Discover and American Express have signed on along with PayPal, the major processors and more specialized payments pro- viders, including Cachet. “Rather than disrupting the payments in- dustry, Apple found a way to work with incumbents—card issuers and networks—to bring a familiar pay- ment instrument [the card] into the digital world,” says Zilvinas Bareisis, a senior analyst with Celent.
The final key to Apple Pay’s smooth path to acceptance was its unique technical design, using an embedded secure element controlled by Apple, in contrast to other m-payments concepts that required partnership with
a third party, such as a mobile network carrier, to support
a hardware secure element built into a handset or SIM card. Apple Pay also marked the first implementation of issuer-side tokenization specifications pub- lished last year by EMVCo— which Visa and MasterCard
APPle PAy TOPS MObile WAlleT USAGe, SATiSfACTiOn levelS
MObile WAlleTS M-PAyMenTS USeRS PlAn TO USe in The neXT 90 DAyS
Apple Pay 45%
PayPal 28%
Google Wallet13%
MObile WAlleT SATiSfACTiOn levelS AMOnG M-PAyMenTS USeRS
Apple Pay 66%
PayPal 45%
Google Wallet 33%
source: 451 Research, March 2015 survey of 4,168 consumers.
Rather than disrupting the payments industry, Apple found a way to work with incumbents—card issuers and networks— to bring a familiar payment instrument [the card] into the digital world.
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immediately supported—to en- hance m-payments security by substituting the payment card account number with a token that’s of limited value to fraudsters if intercepted. And, with concern rising around data breaches, m-payments eventually could be
—Zilvinas Bareisis, Celent
seen as more secure than tradi- tional payment cards, some data suggest (see page 68).
Challenges Ahead
Apple Pay still faces plenty of challenges. It’s far from ubiquitous —it has a relatively small base