Tim Green: I'll say it again: Apple will not 'do' payments.

May 17th, 2014, 00:30 Posted By: wraggster

But it will use the iPhone to prove to shops that you are really you.
Funny to see the Apple NFC rumours re-surface again this week.
Apparently, Cupertino has done a deal with a Chinese bank to support an NFC-enabled Passbook app that can make payments. And it’s gearing up to include NFC in iPhone 6.
It’s only served to amplify the noise around the firm’s mooted move into mobile payments, which has chugged on for years now.
Now, I don’t have any insider info on this (does anyone when it comes to Apple?), but I have read loads and loads of technical payment papers to try to get my head around what might happen next. And nothing yet has changed the contention I have always held:
Apple will not do payments. Apple will do authentication.
To explain why, let’s just go back to the kind of moronic analysis that I’m comfortable with. This will take the form of a conversation with myself.
(Any payment geeks can shoot me down. In fact, I’d encourage it. It’s the only way to learn).
From a consumer point of view, are payments ‘broken’?
No. Cash or cards take seconds to use. And they’re universally accepted (in developed marketed)
From a merchant point of view, are payments broken?
Sort of. Cash is expensive and dirty. Card machines cost a lot (hence the success of Square et al), and commissions are expensive.
From a merchant point of view, is consumer insight broken?
God yes. Online retailers know everything about their customers; physical stores next to nothing.
So how can high street retailers acquire this info?
By getting people to shop from their phones, where there’s an opportunity to gather and aggregate data.
But we know that customers don’t think payment is broken
I know, so you offer them something else
Ah, so it all comes back to offers and loyalty and discounts etc
Yes. But also a more personalised service, the chance to make payments anywhere in store, and end to queuing, maybe even get personalised pricing based on your previous spending.
How does Apple make this happen?
I don’t know for sure. No one does. But here’s a guess. Apple introduces some kind of payment API for apps. It means that apps or Passbook products can ask ‘do you want this app to store your card info?’ and one click retrieves the details from your iTunes account.
So now, when you’re shopping in store with that retailer, the app will appear on your home screen (GPS enabled) you’ll be able to activate all kinds of offers and then check out instantly with a TouchID fingerprint.
So doesn’t that move Apple into payments?
No. Apple is not moving any money around. It’s not taking a fee. I believe any move in direction of payment processing would be suicide for Apple. Have you seen the grief that PayPal gets? No, this is providing speedy access to stored payment details, and a reliable form of user authentication. Most important it's helping retailers make more sales.
What’s in it for Cupertino?
First and most important, it keeps iPhones at the centre of users’ lives. Apple makes 40 per cent margin on $600 phones. This is the primary business it has to protect and sustain.
What else?
It gives Apple access to transactional data. It can use this serve up insights and new ad services to brands – and charge for them. If you think about it, this stuff is gold dust – and it’s never been deployed by Visa or MasterCard.
How will Apple-authenticated transactions take place in store?
I think Apple is agnostic about this. All it cares about is being able to exercise control. That’s why it didn’t ever fancy using NFC when it was all about operators putting wallets in the SIM.
Now that HCE lets you put a wallet in the cloud, Apple is free to consider NFC again. Hence those rumours. It can happily use NFC along with Beacons and other ideas.
Would Apple authenticated payments be safe?
Well, this is where I struggle. Essentially, the key to answering this lies with a full understanding of tokenisation. An understanding I just don’t have.
But broadly, tokens represent a way to make ‘card not present’ payments very safe. They do this by generating a random token to make a transaction, which is useless to anyone that intercepts it.
This token can only be generated by an trusted device (like a phone). How can a bank trust this device? Well, that’s where Apple wins – thanks to a combo biometrics and credit records.
Last year, Visa and MasterCard confirmed they will move towards tokenisation and as I understand it, Apple is devising a system to incorporate it.

The above might all be bollocks. The raving of someone who talks to himself. In print, for God's sake.
Like I said, I don’t have a hotline to Tim Cook, despite sharing a similarly boring two syllable name.
Maybe we'll know what the plans are in a few months' time at the next big Apple launch event. But then it's equally possible that the 'one more thing' might not be 'we're going to revolutionise retail' but 'the iPad now comes in black."

http://www.mobile-ent.biz/payments/t...ayments/043515

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