Mobile Wallet Media is a news media, analyst, marketing and consulting firm focused on the future of mobile: payments, marketing, loyalty commerce, security, prepaid, virtual currency, daily deals and the convergence of them all with social and local. The Chief Editor, Randy Smith, was the primary founder, inventor and former CEO of MobilePayUSA, a TechCrunch Disrupt Startup Alley Winner.
This past week Apple may have slipped a bit on it's banana of an iPhone 6 plus (JK - got one on order), but on September 9 it finally entered the payments world. In doing so it revived NFC from near death. I'm sure SoftCard (ISIS) has been doing cart wheels since. But we are still left with the grand canyon of a chicken and egg problem with NFC. It may be years until the merchant base passes 30% of terminals equipped with NFC. Until this gap is plugged, the NFC mobile payments rails will be very limited. With ISIS and Google Wallet being slow to grow in the past few years NFC was nicknamed 'Not For Commerce.' Add to this, retailers have been dragging their feet on deploying EMV until the liability shift date nears and awaiting more issuers to ship new chip cards.
Apple's primary goal is to sell more iPhones. They will not, if ever, earn significant revenues from payment processing. They may gain some decent revenues from pushing offers, but the revenues will never reach a point where they are selling their Benz phones at Honda prices. Therefore, Incorporating BLE as a conduit to enable mobile payments does not fit inside of Apple's revenue model (at least in the short term). Right now Apple need only to stoke the fire by adding to their blue-chip merchant base and by partnering with banks that will produce card-linked offers when using Apple Pay.
So what's Apple Pay to do to hatch it's potential golden egg and to keep it from being fried? It must speed up adoption of NFC at POS. My previous article gave Apple a way it might bridge the NFC gap by providing an iNFC peripheral, but in further reflection this is not likely to happen. What we may see however are partnerships with terminal OEMs and acquirers that subsidize part or all the cost of new terminals equipped with NFC and EMV. It'll be interesting to see what Apple may add at Money2020.
Tokens and Security
Security in payments seems to be an ever elusive as hackers continue to snatch payment credentials through under secured doors of entry. Some say EMV cannot happen fast enough, but this would not have prevented the Target breach, nor would it prevent most hackers from obtaining card credentials.
Tokens are said to now be the answer to devalue breaches. With the launch of Apple Pay, tokens paired with a Device Authentication Number and geo-location, can very effectively derail fraud. In the coming year a token makeover sandwiched with EMV shall be viewed as the patch to defeat data breaches. Yet, until ubiquity is reached with NFC, EMV and BLE enabled transactions card fraud will stubbornly remain intact.
I've offered a glimpse of my solutions to end card fraud via MonOff technology. This is enabling consumers to turn their card account or MONEY ON and OFF from a mobile app and/or via mobile geo-location. This alternative approach to defeating fraud via consumer authorized transactions has gained some traction and has advanced a solid proof of concept in defeating fraud via OnDot System's solution. Could this card-locking technology derail EMV? Could there be an even bigger disruption awaiting to be revealed using consumer authorized payments and mobile? Umm, I think so. Yet for this to happen it would disrupt POS hardware, including need for EMV. Guess we'll all see.
The entry of Apple Pay will revive NFC from it's death bed, but it will also rise the tide for all mobile digital wallets whether they use NFC or not. The Apple Pay launch may spark existing players to embrace innovation that was previously passed upon. Why? Speed to reach ubiquity in the marketplace. With the ever-looming NFC gap to fill to enable NFC to become the defacto standard, wallets may embrace alternative conduits of enabling mobile payments. Let's face it, what digital wallet wants to compete with Apple?
PayPal at first glance appears to be most threatened by Apple's entry into payments, but until Apple incorporates BLE to enable payments PayPal will continue to grow it's physical world presence. And just today it announced it's splitting apart from eBay. This should free PayPal up to expand as fear of competition with retailers is eliminated and prospects for M&A rise. ISIS, now SoftCard, may be given a temporary lifeline via Apple adding NFC, but with the carriers in tow and the previous years of slow growth, a picture of an uphill battle remains. MCX, AKA CurrentC, is the 'NFC is Not for Commerce' merchant network. So this will be interesting to watch vs. Apple. Google Wallet may also be thrown a lifeline with NFC in iPhones but how well can they play with Apple? Amazon has it's own Apple-like walled garden and 200-million loyal members but it has a serious conflict of interest with merchants. LevelUp seems to already have tethered a (life?) line to Apple Pay. Paydiant is well entrenched with major partners such as FIS, Vantiv, MCX.
So will NFC become the long sought after standard for mobile payments to grow mass adoption and usage? Well, it seems to me that CurrentC is a sleeping giant that may make NFC irrelevant for years to come as it's rails ride upon the scan of a QR code -- something almost as simple (and ubiquitous at CurrentC merchants) to use as pulling your card out of your wallet. Pair this with the likelihood of the CurrentC app incorporating Touch ID for authentication (as I'm sure most all wallets will add feature) and it seems to me that Apple Pay may have some serious competition. CurrentC's merchant base is formidable even for Apple. Plus the cumulative card base of CurrentC may rival the U.S. based 800-million card base of Apple. CurrentC is using a tokenized QR code with actual credentials stored in the cloud. Consider also that Apple may not have been completely truthful in saying card credentials are not being stored on the phone. When it fact it appears for at least in app purchases encrypted credentials are being used within the transactions.
Then of course the mobile/digital wallet still faces the incumbent dominance of the good old mag-stripe card. Yes even with EMV coming to save the day. Not! Granted, adding Touch ID to payment apps adds a new speed factor that may enable mobile payments to match the convenience of cards, but the payment card is here to extend it's stay. Ubiquity and convenience reign supreme. Getting people to change their habit of paying with a card will require incentives, a ton of creativity and fun. Don't rule out entertainment as being a key aggregation onramp to move mobile payment usage forward. Ten's of millions of consumers per year spend thousands of dollars to visit Disney resorts. Most all of us spend thousands every year to watch movies and TV.
I look forward to seeing you once again at Money2020.
The 'Disruptive Innovation Meteor' named MOBILE has struck the world's of retail payments, banking and marketing. Firms wanting to survive, compete and win in this new environment must adapt by embracing disruptive innovation or risk becoming irrelevant or extinct. Read story