Is Apple Pay The New iTunes?

Everyone is talking about whether or not Apple Pay will or will not succeed. I know I’m jumping the gun on this, but I think Apple Pay has already passed the tipping point. Although it will take some time yet, I feel confident Apple Pay is going to be a viable payment solution. ((If you’re not as confident as I am, you can read some excellent discussions of the pros and cons, the ups and downs, of Apple Pay, in the following articles:

Why Apple Pay could be the mobile-payment system you’ll actually use

Why Apple Pay Can Succeed Where Google Wallet Failed

Apple Pay’s Competition Is About To Learn That Walmart Isn’t Starbucks

How Apple Creates Leverage, And The Future Of Apple Pay

In my opinion, one of the best sources for analysis of Apple Pay is the rambling discussion between James … and Ben Thompson that took place on the Exponent Podcast, Episode 023: Apple Pay. Long, but vey much worth the time.))

4cards

Since I’m already comfortable with the idea that Apple Pay will succeed, I now turn my attention to the implications of that success. In the long run, how will Apple Pay affect the payment category? I think we may be able to use the recent past to help shed some light upon that murky future.

The further back I look, the further forward I can see. ~ Anonymous

The Year 2000

Rewind
Rewind the clock to the year 2000 — before the iPod and iTunes had made their entrance upon the tech stage — and let’s follow the typical CUSTOMER as they make a typical purchase of music.

Customer
The CUSTOMER decides they want to buy some music. They drive or walk to…

Music Store
…the local MUSIC STORE. They walk up and down the aisles perusing the rows of…

Physical Media
…Records, Cassette Tapes or CDs, looking through the various…

Albums
…ALBUMS. They select one or more albums, buy it, take it home and play it on their…

Music Player
…Record player, tape deck or CD player.

The Year 2010

Wind It Forward
Wind the clock forward to the year 2010. How did the typical CUSTOMER buy music then?

Convenience
In the year 2010, the CUSTOMER picks up their smartphone, selects a song — not an ALBUM — buys it, downloads it, and plays it almost instantaneously on a single, mobile device.

The CUSTOMER has benefited because they buy less unwanted music in the form of ALBUMS, buy it without having to travel, buy it without being inconvenienced, and listen to it without having to purchase or co-ordinate their purchase with a separate MUSIC PLAYING device.

Disintermediation

My online dictionary defines disintermediation as:

In economics, disintermediation is the removal of intermediaries in a supply chain, or “cutting out the middlemen.”

Business theory often refers to the participants in a supply chain as being part of a “stack.” In our music buying story, there were numerous participants in the “stack” who were necessary in 2000 but were unnecessary in 2010. The MUSIC STORE is gone. PHYSICAL MEDIA is gone. ALBUMS are all but gone. Stand alone MUSIC PLAYERS are niche. They were all disintermediated — removed from the stack — by the introduction of the iPod/iTunes combo.

The Year 2013

We’re finally ready to return to the subject at hand — Apple Pay. It’s the year 2013, before Apple Pay has made its entrance upon the tech stage. Let’s follow the typical CUSTOMER as they make a typical retail purchase.

Customer
The CUSTOMER decides they want to buy something. They drive or walk to…

Retailer
…the local RETAILER. They walk up and down the aisles perusing the rows of merchandise. They go to the…

Cashier
…CASHIER in order to pay. They pull out their…

Credit Card
…magnetic striped CREDIT CARD which, in the United States, they got from…

Credit Card Provider
…a CREDIT CARD PROVIDER like Visa, MasterCard or American Express. Those credit cards are directly hooked to their…

Bank
…BANK. The CUSTOMER then swipes that card in a….

READER
…credit card READER and walk out of the retailer with their purchase.

The Year 2023

APPic

Wind It Forward

Wind the clock forward to the year 2023. How will the typical CUSTOMER make a retail purchase then?

Convenience

In the year 2023, the CUSTOMER travels to their RETAIL STORE, selects one or more items to purchase, proceeds to the checkout, waves their wrist wearable device before a READER, confirms the purchase and goes on their merry way. They may even make their purchases item by item as they select them and then stroll out of the store at their convenience without even having to stop at a register.

The CUSTOMER benefits because they make their purchases faster, with less waiting in lines; because they no longer carry physical CREDIT CARDS that can be stolen; because they no longer expose their CREDIT CARD numbers to the employees of the retailers, and because they no longer share their personal information with the Retailer, the BANKS or the CREDIT CARD PROVIDERS.

Disintermediation

In 2023, the CREDIT CARD is gone, the READERS have all been replaced, and there are far fewer CASHIERS with far more self-help checkout kiosks.

Marginalization

Another interesting thing has happened too. In music, some parts of the “stack” — such as the MUSIC LABELS — survived the iPod/iTunes revolution, but they were no longer the face of music. In payments, Apple Pay and other competing payment systems will stand between CUSTOMERS and the CREDIT CARD PROVIDERS and the BANKS. When people buy, they will think APPLE PAY, not Visa, MasterCard, etc. and they especially won’t think of their BANKS.

The MUSIC LABELS did not disappear after the introduction of iPod and the CREDIT CARD PROVIDERS the BANKS will not disappear after the introduction of APPLE PAY either. However, they will have been marginalized and that may have severe consequences.

Banks

It is the role of BANKS that most interests me. Many people have a relationship with their BANK because they go into a physical building and interact with a teller. More and more, the need to actually visit one’s BANK is disappearing. Payment systems, such as Apple Pay, sit atop the BANK and further obscure the BANK from the CUSTOMER’s view.

Here is the key. Today BANKS are very “sticky.” People are unlikely to change BANKS because they have a relationship with their BANKS and because it is a pain in the neck to make a switch with very little to be gained. But what happens when one doesn’t have a relationship with their BANK, when every BANK looks like another, when every BANK provides virtually the same services, when it’s easy to make a switch and when the benefits of switching are made clear?

With APPLE PAY, and competing payment services, the BANK becomes just an interchangeable block in the stack. When Apple — the company you know and love — comes to you, suggests you transfer your funds from your bank to another bank, makes the changeover easy, and clearly defines the benefits of making that change…are you going to say no?

Conclusion

It is said that the present is pregnant with the future. ~ Voltaire

The iPod/iTunes combo changed the music business forever. It disintermediated several players and marginalized the roles of others. If Apple Pay succeeds, I believe the same will happen in payments. Some parts of the payment system will disappear forever and other parts will be obscured, then marginalized, then commoditized and, ultimately, subject to easy substitution and replacement.

Published by

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?

87 thoughts on “Is Apple Pay The New iTunes?”

  1. In tech, the disruption happened with the CD. This was the great analog to digital conversion of music, that made everything else possible. Downloads became technically feasible, using the networking and storage of the day, in the early ’90’s when acceptable forms of compressing digital music became available.

    Napster is the great disruptor, albeit in a revolutionarily, criminal, and anarchic way, of the modern music store. Several services such as Musicmatch, Real Networks, Yahoo, and yes, Apple tried to legitimize and monetize what was before them. In that theater, Apple won. But it was to monetize what was already being done, they didn’t invent anything in this regard. They did get what is now about 1 billion credit card numbers (mandatory). So yes, Apple Pay had it’s roots in the iTunes Store and is an evolution from that.

    It’s quite clear now as to why Apple sued Real Networks when Real Player could suddenly manage Real Networks customer’s iPods. “We can’t have people buying music from others. What about all those credit card numbers?”. Today, jailbreaking your device is transiently legal. Real should have told them to kiss off, but probably didn’t have the funds to withstand the legal challenge.

    The following are said “tongue in cheek”…

    “When people buy, they will think APPLE PAY”
    And the Kardashians, must not forget the Kardashians…

    “When Apple — the company you know and love — comes to you”
    You’re kidding…right?

    1. My article focuses on Apple Pay because Apple Pay is front and center on this issue, but I think all payment services that are similar to Apple Pay will have the same effect, i.e., that of distancing the Customer from the Credit Card provider and the Bank.

  2. Apple Pay is the new iBeacons, fancy new technology for geeks but nothing more. It doesn’t actually solve any problem, after the initial hype, people simply won’t bother.

    1. “It doesn’t actually solve any problem” – Will

      Wow. Vehemently disagree. Many problems reach a certain level and then stall. Taking the last step or going the last mile if often the most difficult — and the most valuable — contribution to the endeavor. Electronic payments were going nowhere prior to Apple Pay and suddenly they’re taking off. Apple solved the last step — and in doing so, made the rest of the steps that much more worth while.

      1. “Electronic payments were going nowhere prior to Apple Pay and suddenly they’re taking off.”

        In the US. The rest of the first world countries have been using contactless cards for years now and US will follow soon on that path.

        As a person who uses my touchless card on the majority of my purchases, I really don’t see how a smartphone app doing the same thing helps at all.

          1. And increased inconvenience. After all a phone is larger than a card and you may drop it.

            In terms of security… You can always cancel a lost card and blame your bank for a card hack. What’s the problem?

          2. You’re spouting nonsense now just because you don’t like Apple and don’t want Apple Pay to succeed. I suggest you learn more about how Apple Pay works. It is as convenient and more secure. I mean really, your argument hinges on a phone being more easily dropped AND ignoring the hassle of cancelling a card or dealing with your bank in case of a hack. As I said, pure nonsense.

          3. Actually, I think it won’t succeed because Google Wallet didn’t, with pretty much the identical usage scenarios. At least, not the success you think it will have.

            People don’t care about security as much as you think. After all, people still use swipe and sign in the only country where Apple Pay is available.

            Also, I did lose a few cards in my time, it’s dead easy to call and ask for a new one delivered. Some banks even print out a new card on the spot for you. Takes literally less than 5 min.

            And finally, we already have contactless payments, US coming soon as well. A contactless card makes do much more sense than using your phone and much easier.

          4. “I think it won’t succeed…” – Will

            Fair enough, but I’ll take the other side of that bet.

          5. FYI I don’t believe in Google Wallet either. I find the whole “pay with your phone” thing a hype.

            Mainly because I’ve been using contactless cards for years now.

          6. It is easy to underestimate a marginal convenience, but I think a similar model to compare is the e-borading pass for airlines. It isn’t really all that much more convenient than just printing out the boarding pass, either at home or even at the airport, especially if you are checking bags. But there are still a substantial number of people (including me) who prefer the smartphone boarding pass. My phone is always quickly and easily at hand. My boarding pass/credit card not as much. I know it seems like not that much to the skeptic, but it is huge to the user.

            Joe

          7. Yes, you are free to use old tech, I don’t think anyone is arguing otherwise. But please don’t make silly arguments about the new tech, it isn’t helpful to the discussion.

          8. You do realize that you’re speaking with an early adopter. New is not always optimum. Sometimes it’s half baked.

          9. You sure don’t sound like an early adopter. So, are you now making the argument that Apple Pay is half baked?

          10. I have no comment on Apple Pay. Neither is it relevant to me. I don’t use an iPhone, and payment systems are not incentive for me to do so.

            Neither is Apple Pay all mobile payments. It’s a singular mobile payment system.

            Also, it’s the merchants that are screwing everything up, including not carrying Apple Pay. Things may be different in Canada, but in the US it’s not even half baked. I use Softcard by Amex, and some merchants make you still sign.

          11. In Canada it is pretty much all chip+PIN debit and credit cards, as well as contactless cards. Apple Pay is indeed relevant to you, because it is very well-design as a system, provides many benefits for consumers, and you should hope that others move to copy it as much as possible.

            Perhaps your inexperience with more advanced systems of payment is why you can’t seem to see the clear benefits of a system like Apple Pay.

          12. Fair enough, I get the point, thanks.

            However, your analogy is incorrect. We’re not talking about cash vs Apple Pay, where a clear benefit exists.

            It’s contactless cards vs Apple Pay, where some might say it’s more convenient to use the card.

            Finally, are you seriously having moments where you don’t have your wallet but you have your phone?!

          13. Yeah, I’m not talking about cash vs Apple pay either. I think a paper boarding pass vs e-boarding pass is comparable to contact-less CC vs Apple Pay.

            It is not about having my phone vs having my wallet. It is more about what is more readily available. I use my phone far more than anything _in_ my wallet.

            I agree it is a marginal convenience and not readily recognizable as a compelling convenience by most reasonable standards… until it is you pulling out your CC from your wallet versus the phone which is likely already in your hand anyways.

            Similar to fishing out the boarding pass vs your phone which is already likely in your hand, or in an accessible pocket at the most.

            Joe

          14. ” the phone which is likely already in your hand anyways”

            If that’s the case, fair enough. But you probably shouldn’t :p

          15. “Finally, are you seriously having moments where you don’t have your wallet but you have your phone?! ”

            I was just reminded (by an appropriate interlocutor) to also stop thinking like a guy. Not all people have their wallet in their pants pocket.

            Joe

          16. Considering the effort Apple puts into design, the attention to detail, the user experience, the build quality, and more, “It’s Apple” is actually a pretty good argument.

          17. Which is it? Not at all or rarely? If it is rarely then I guess OSX and iOS are those rare instances when Apple creates software that is easy to use. If it is not at all, then I guess OSX and iOS don’t actually exist. Or do you mean that operating systems aren’t software? Or maybe you think Apple Pay is all software with no hardware elements?

          18. Nice try but I wasn’t saying all Apple software is bad 🙂

            I said “made by Apple” is not a good reason to say a piece of software is good, since most software made by Apple is subpar to the competition. iCloud, iWork, iMaps 🙂

            It takes more than a couple of good products in 15y to gain a good reputation.

            Unless you’re saying “made by Microsoft” is a good reason too, since you can find one or two good products made by MS in the last 15y 🙂

          19. “Nice try but I wasn’t saying all Apple software is bad”

            You did actually imply all or most of Apple’s software was bad. That’s what “not” and “rarely” mean. So, we’ve established that even you think Apple does make some good software. That’s quite something.

            The only software I find borked is iCloud, it needs a lot of improvement. Everything else I’ve used from Apple, for decades, is pretty darn good and trouble free, well-designed, good UI. Maybe you’re not aware of this but Apple is kinda known for ease of use, simplicity, design, in both hardware and software. OSX and iOS are also kinda good. And reviews of Apple Pay seem to agree it’s kinda good as well.

            So again, saying something might be good because it was made by Apple isn’t a bad argument at all. Apple has a reputation for quality. Not that you’d ever admit that, but it does happen to be true.

          20. “you did actually imply all or most of Apple’s software was bad.”

            Yeah, I said most, not all, from the start. You’re just misinterpreting what I said.

            You’re full of it and you know it.

            “Only iCloud needs work ”
            “Numbers accurately calculates my grocery shopping, of course it’s good”
            “iMaps works in my city, it’s must work everyone in the world”
            “The Apple Mail app displays my emails, it’s so simple and intuitive! Nobody needs more”
            “I don’t need a maximise button in OSX, not until Apple makes it because they do window maximisation right ”

            Agree to disagree about your the quality of Apple software. I use a Mac and the only Apple software I use on it is the OS, everything else is subpar.

          21. Odd quotes you’ve added there, I’ve never heard real users say stuff like that. Like many people who don’t like Apple’s drive towards simplicity you miss that there’s a lot of power in making software simple.

            That’s always the angle the anti-Apple trolls take, oh Apple stuff is for noobs. Funny, all the programmers I work with that have their Masters or PhDs in Computer Science use Apple hardware/software. I guess they’re noobs.

            “I use a Mac and the only Apple software I use on it is the OS”

            Ah, so the most important, fundamental aspect of the computing experience, that part works well, that’s one of the software bits Apple is good at. And iOS? Is that okay or does that totally suck?

            But I digress, you’ve shifted your argument to software only. Apple Pay is not just software, it is hardware and software, integrated. Do you seriously want to argue that Apple sucks at integrating hardware and software? This should be interesting.

          22. “all the programmers I work with that have their Masters or PhDs in Computer Science use Apple hardware/software”

            Well the things I quoted may be exaggerated but they do seem to be spot on based on your response :))

            “you’ve shifted your argument to software only”

            Yeah… No. My argument was that Apple Pay doesn’t solve any problem and it’s a hype, regardless of how well made it is. That’s my argument.

            In support of that, I said we shouldn’t trust something from Apple is automatically good, particularly in software (that’s when software came in the conversation, can you follow so far?), as iOS and OSX are the only good examples you have for the past 15y, everything else is subpar.

            Clear enough yet or is following a conversation too hard?

          23. “My argument was that Apple Pay doesn’t solve any problem and it’s a hype, regardless of how well made it is. That’s my argument.”

            Well, then you’re on the wrong side of progress, systems like Apple Pay are clearly the future. Why hate the future just because Apple is involved? That seems silly. Systems like Apple Pay have a lot of benefits. Security. Privacy. Convenience. Extensibility.

            Do you like merchants gathering data about you and your purchases as you shop? I sure don’t. That’s just one problem Apple solves for the consumer.

            “iOS and OSX are the only good examples you have for the past 15y”

            That isn’t remotely true. There’s a difference between software being “subpar” and you simply not liking how it works. There’s lots of Apple software I use regularly and it works great, doesn’t give me any trouble, helps me get more work done, is easy to use, and so on. Such as: Safari, Mail, Pages, Numbers, iTunes, Logic Pro, Final Cut Pro, Calendar, Contacts, TextEdit, Maps, Time Machine, Keynote, iPhoto, iBooks. I’m probably forgetting some. Now, you can argue that you like other software better, that there are features you need that I don’t that aren’t in some of these apps, but the truth is I use these apps regularly and they work great for me.

          24. “Do you like merchants gathering data about you and your purchases as you shop? I sure don’t. That’s just one problem Apple solves for the consumer.”

            That is only a problem for swipe and sign, not chip and pin nor contactless.

            “There’s lots of Apple software I use regularly and it works great”

            But not the best. Every single software you mentioned is subpar to its competition.

            “they work great for me.”

            Yes, FOR YOU. That’s hardly an objective quality assurance.

          25. “That is only a problem for swipe and sign, not chip and pin nor contactless.”

            Got a source for that? As far as I’m aware, chip+PIN and contactless are certainly more secure, but the banks and merchants are still doing all the same programs, loyalty rewards, etc, gathering customer data.

            For example, even with contactless and chip cards VISA still says it gathers the following data as you use its cards: “the account number associated with the card; the location of the transaction; the time and date of the transaction; and the amount of the transaction.”

          26. “the banks and merchants are still doing all the same programs, loyalty rewards, etc, gathering customer data.”

            The banks knows that regardless of technology, including Apple Pay. As to contactless, the merchants don’t get as much as you think, they get your data IF you sign up to their loyalty program or whatever. Otherwise it’s just a token (exactly the same as Apple Pay).

            Plus, if you care about security, use chip and pin. Although, I really don’t see how you think Apple is trustworthy, after all the NSA business.

          27. “As to contactless, the merchants don’t get as much as you think, they get your data IF you sign up to their loyalty program or whatever. Otherwise it’s just a token (exactly the same as Apple Pay).”

            This isn’t true. Every source I’ve found says the merchants get the same customer data they always get, in fact it’s a *feature* promoted to the merchant by the *providers* of contactless and chip+PIN cards. The merchant gets even more data if you sign up for a loyalty program, but they are getting your data as you make purchases even if you don’t sign up.

            The *reason* merchants don’t like Apple Pay is they *get no data*. If you’ve got sources that say otherwise please provide them. So far you have failed to provide any source at all.

            Banks of course have your payment data, but that is a very different thing from a merchant gathering data as you shop.

            Google Wallet is even worse, they gather tons of data as you use that payment service. Straight from Google Wallet’s privacy statement:

            “When you use Google Wallet to conduct a transaction, we may collect information about the transaction, including: Date, time and amount of the transaction, the merchant’s location, a description provided by the seller of the goods or services purchased, any photo you choose to associate with the transaction, the names and email addresses of the seller and buyer (or sender and recipient), the type of payment method used, your description of the reason for the transaction, and the offer associated with the transaction, if any.”

            So much for your belief that Apple Pay and Google Wallet are identical. On the data each system gathers, they’re miles apart.

            “if you care about security, use chip and pin”

            Apple Pay is even more secure than this. Chip+PIN can be hacked at the reader itself, there have been many instances of this happening in Canada.

            I’m not sure why you’re against payment systems like Apple Pay. Is it just because it’s Apple? Hopefully Apple Pay’s lead will force Google to change their data gathering policy. Apple Pay really is very well designed and has many advantages over any card system. This is obvious, and yet you continue to argue in favor of systems that are less secure, less private, less convenient, and less extensible.

          28. “get the same customer data they always get”

            What data exactly? I’m pretty sure it’s illegal for my bank to share my bank statement to a merchant. And I’m certain they don’t get my name or address either.

            So what data can you get from a chip and pin token that you can’t get with Apple Pay?

            “The merchant gets even more data if you sign up for a loyalty program, but they are getting your data as you make purchases even if you don’t sign up. ”

            Why do loyalty programs exist except for the purpose of building a profile on your purchase history?! If merchants already have your data, why do they bother with these expensive programs?!

            What data, exactly, would they gain? To make me worried about this, please be specific. Don’t just shout “your data!”

            “Banks of course have your payment data, but that is a very different thing from a merchant gathering data as you shop.”

            Love it how fast you changed your mind about banks.

            “When you use Google Wallet to conduct a transaction, we may collect information about the transaction”

            Because there’s a purchase history that doesn’t come from the bank. Logic.

            “Apple Pay is even more secure than this. Chip+PIN can be hacked at the reader itself”

            And how, pray tell, is Apple going to prevent a hacked terminal? What’s different when Apple Pay send the token, exactly?

            “I’m not sure why you’re against payment systems like Apple Pay. Is it just because it’s Apple?”

            I’m against Google Wallet too. It’s a gimmick.

            “Apple Pay really is very well designed and has many advantages over any card system. ”

            Honestly, do you have a contactless card and live in a town where 90% of merchants support it? Because I do and I suspect that everything you say is from your various third party ” sources ” that may or may not be impartial.

            Apple Pay is anything but more convenient. And you still didn’t explain why is it more secure than any other token based system.

          29. What third party sources? The info I’ve given you comes directly from VISA, Google, Apple, MasterCard, the Smart Card Alliance.

            Let’s go through this again. When you pay for something at a store with a card, the merchant typically gathers some information about the purchase. Your bank of course gets info about your purchases because they’re *your bank* where you keep your money. I thought that was obvious. Your bank already has lots of info about you, which you gave them in order to set up an account, get a mortgage, a line of credit, a car loan, and so on. I would guess all purchases look pretty much the same on your bank statement, merchant name, date, amount. But that info stays between you and your bank. As far as we can say banks are secure and private, that info is secure and private.

            Now, back to the merchant. They are gathering data as you shop. This isn’t hard to find out, there are many sources. From the Smart Card Alliance org:

            “contactless payment can provide merchants with customer information. Consumer information is critical for merchants who want to understand customer behaviour better”

            And: “One key issue for merchants is whether changes to their POS system and payment gateways will cause them to lose control of what they perceive as their customer information”

            The answer shortly after in the same document is of course that merchants can get even better customer info with contactless cards: “with contactless credit/debit card sales, better customer information becomes available.”

            I suppose I should note that VISA, Mastercard, Softcard, etc are all part of the Smart Card Alliance.

            Now, let’s get more direct evidence of the data gathering. From MasterCard, outlining what data they gather: “the card account number, the merchant name and location, the date and the total amount of the transaction”, and later on in their privacy policy they say “We may share the personal information we collect with… merchants”.

            I didn’t paste in all the text, it’s a bit long, they share your info with a lot of entities, the merchant is just one.

            Also interesting, from some info for merchants from MasterCard, specifically about contactless cards:

            “With Near Field Communication (NFC) technology close at hand, enabling PayPass is your best entry into accepting mobile payments. Those customers who use a card to tap for purchases today will be the customers who will use a phone to tap for purchases tomorrow.”

            Back to MasterCard, they’ve got a snippet about how transactions appear on your bank statement: “Purchases made with PayPass will be displayed on your statement just like any other purchase you make with a regular card.”

            And we’ve established they share that info with the merchant. So, are we done yet? Have we established that merchants are gathering, at minimum, the card account number, date, and amount? The merchant of course doesn’t need you to add in their own name.

            VISA actually has a service for merchants to help them manage and secure customer data.

            So, we know that merchants gather data and we know what data (and it may be even more). The merchant is then a weak point in the security. Isn’t a system that doesn’t share data with the merchant more secure?

          30. “Have we established that merchants are gathering, at minimum, the card account number, date, and amount”

            They will do that with Apple Pay, otherwise no merchant will be able to do basic accounting….

            Are seriously suggesting that the merchant doesn’t know what they sold, when and at what price when using Apple Pay?!

            Also, the card number isn’t exchanged with contactless or chip, it’s a token…

            “I didn’t paste in all the text, it’s a bit long, they share your info with a lot of entities, the merchant is just one.”

            Apple Pay works with Visa and Mastercard and the banks! It’s the same infrastructure! Whatever info they share with whoever, they will do with Apple Pay. You actually think Visa won’t know what you paid and when when using an iPhone?!

            You’re technically still using their card!

            Apple may not store this data, but everyone else involved in the purchase transaction is the same!

            Finally, what you do not understand is that when Visa and Mastercard talk about contactless payments, that includes Apple Pay.

            Every single argument you said about contactless cards can be said about Apple Pay since they work on the same payment infrastructure using tokens.

            Apple didn’t build a new payment system, they’re using an existing one. The tokenisation system.

            That’s why Google Wallet, Apple Pay and contactless cards work on the same terminal in the same way.

            PS: I just need to repeat this question because I really want to know.

            Are seriously suggesting that the merchant doesn’t know what they sold, when and at what price when using Apple Pay?!

          31. “Apple Pay works with Visa and Mastercard and the banks! It’s the same infrastructure! Whatever info they share with whoever, they will do with Apple Pay. You actually think Visa won’t know what you paid and when when using an iPhone?!”

            This does seem to be the key difference. While contactless card providers such as VISA and MasterCard partner with merchants and share data with them, Apple does not. So that key piece of information, the card account number (who you are) is not shared via Apple Pay and from all the info I could find from direct sources, it would appear that info is shared with merchants with all other methods of payment (other than cash).

            You are correct that the merchant easily gathers the date and amount of the transaction, and location (obviously), but the important bit the merchant wants is some kind of identity tied to the transaction. And we can see directly in the info from VISA, from MasterCard, from the Smart Card Alliance, and also from MCX by the way, that the identity info is shared with the merchant in some way.

            Contactless cards do use tokenization, but again we have direct info from the card providers that they are providing some kind of identity info to the merchant.

            “That’s why Google Wallet, Apple Pay and contactless cards work on the same terminal in the same way.”

            They do not work in the same way. We have established that both Google and contactless cards result in your account info being shared with the merchant. It would seem this key piece of information is not shared with the merchant when using Apple Pay.

            “Are seriously suggesting that the merchant doesn’t know what they sold, when and at what price when using Apple Pay?!”

            I suggested no such thing. The merchant does know what they sold, when, and at what price. The difference with Apple Pay is they don’t know who they sold to, because Apple does not share that information with the merchant. It would seem that all other systems do share that information with the merchant.

            Now I suppose the question is, can VISA or MasterCard share your account info with the merchant via Apple Pay? So far it looks like the answer is no. Again, if you have any sources that say otherwise, please provide.

            “Finally, what you do not understand is that when Visa and Mastercard talk about contactless payments, that includes Apple Pay.”

            No, the privacy policies I looked at applied only to the products and services provided by VISA or MasterCard. They did not include Apple Pay. They talk of a unique identifier with each card that results in better customer information for the merchant. Apple Pay seems to be about as anonymous a system as you can get. The two methods do seem to be quite different in that regard.

          32. This is going well 🙂 We got from merchants getting all your personal data to getting your current purchase data to getting your card number. I love this.

            “I suggested no such thing. The merchant does know what they sold, when, and at what price. ”

            No you did not. But you kept repeating this :

            “For example, even with contactless and chip cards VISA still says it gathers the following data as you use its cards: “the account number associated with the card; the location of the transaction; the time and date of the transaction; and the amount of the transaction.”

            Which implied that Apple Pay does not. But it does. Even if you are right, the only difference is the account number or some unique identifier of the card.

            Which by the way does not translate to a person. Only the issuing bank can do that, which, as you said, can be considered secure.

            So, worst case scenario, someone hacks a merchant and finds out that someone buys cheese and wine regularly from there. There’s no actual personal information breach there. No email, no address, no payment history, nothing. Just terabytes of anonymous data that can’t be translated to an individual person.

            The way I see it, your “personal data” is used to better the merchant and its business, which I definitely like. Maybe they’ll offer a cheese and wine bundle next time I go to my merchant.

            Here’s a few links about how contactless works, how unique tokens are generated for each transaction (like Apple Pay), how it’s just the token being transmitted (like Apple Pay), how no extra information is available on the card than by the CCTV cameras can see.

            https://www.tfl.gov.uk/fares-and-payments/are-contactless-cards-secure

            http://www.visa.co.uk/products/visa-contactless/faqs

            Which actually raises the question, if you care so much about security and you know merchants know when a transaction was made… Don’t you think they can put a face to that transaction using the date and terminal used? Isn’t your face a bit more valuable that the unique identifier of the card that may or may not be shared with the merchant?

            Also, what are merchants going to do with that identifier?! Sure, they can build shopping profiles and other internal strategies, but that data can’t be used for fraud, they can’t tie it to an individual and it’s useless for anyone except for the marketing team.

            Finally, you got secure because it does share a unique identifier of the card? That’s not security. That’s just adding a middleman for your payments, that’s insecurity if you ask me. NSA still exists btw, nothing changed, why would you trust Apple with this.

            In fact, how does Apple know how much it needs to get paid through this service if it doesn’t have a record of transactions? Hmm…

          33. “We got from merchants getting all your personal data to getting your current purchase data to getting your card number.”

            Not necessarily. We know, at minimum, the contactless card providers share your account number back to the merchant. You can look at the info provided by MCX and see that the data shared back to the merchant is much more than just the account number. It will no doubt vary with each service (Google seems to be the worst offender), but no service is providing no data back to the merchant, except for Apple Pay.

            “Which implied that Apple Pay does not. But it does. Even if you are right, the only difference is the account number or some unique identifier of the card.”

            Well, from all the info I can dig up so far it appears I am correct, Apple Pay is an anonymous system and makes it impossible for the merchant to get your account number.

            “So, worst case scenario, someone hacks a merchant and finds out that someone buys cheese and wine regularly from there. There’s no actual personal information breach there. No email, no address, no payment history, nothing. Just terabytes of anonymous data that can’t be translated to an individual person.”

            No, there could very well be terabytes of account data that can be stolen. It depends on the payment service and what info is being shared and stored by the merchant. VISA has a service to help merchants manage and secure customer data. Interesting to note, MCX was recently hacked.

            “The way I see it, your “personal data” is used to better the merchant and its business, which I definitely like.”

            That’s your choice of course. I do not like my account info on file with merchants and I don’t trust them long term to keep it secure. It seems obvious that a system like Apple Pay that completes the transaction with tokens and leaves no real data to share is superior.

            “In fact, how does Apple know how much it needs to get paid through this service if it doesn’t have a record of transactions? Hmm…”

            Do you really not know how Apple Pay works?

          34. “You can look at the info provided by MCX and see that the data shared back to the merchant is much more than just the account number.”

            Please tell, what other data is shared besides the account number compared to Apple Pay ? 🙂 I really want to know. Can it be identified to a person? Can you get my email, address or anything not related to that purchase ?

            If I am to be worried about my data, I want to know of what exactly I need to be worried about. We already established that an account number means nothing to anyone except the issuing bank. So what’s the problem?

            “Do you really not know how Apple Pay works?”

            No, apparently I don’t. Please tell me, if no purchase history is ever recorded by Apple, how does Apple know much much to charge the banks?

          35. Well, MCX collects a lot, from their privacy policy:

            “Information that MCX Actively Collects From You

            Your name, physical address, email address, and mobile device number;

            Payment transaction data and details for payments made for goods and services at participating MCX Merchants;

            Payment Account data you choose to enter into CurrentC™, as well as information needed to complete Payment Account transactions. Payment Account data may include your bank account information, credit or debit account or gift card or stored value account details, related security codes or other payment credentials”

            There’s actually a fair bit more under Information We Collect, but I think the above demonstrates the point that different payment services are going to collect different data. You can easily find Google’s info on what they collect, and it’s even worse.

            We cannot naively assume that all payment systems going forward are roughly the same as Apple Pay. They are clearly not.

            “No, apparently I don’t. Please tell me, if no purchase history is ever recorded by Apple, how does Apple know much much to charge the banks?”

            Roughly speaking, it’s done with tokens and device IDs on the fly, and the bank manages the ID and verification, but the data is not stored and it is anonymized. This is one of the main reasons some merchants don’t want Apple Pay, because it is too anonymous. There’s a great comment on Asymco somewhere that goes into a lot of detail. If you’re actually interested I can dig it up for you. The commenter goes much deeper, getting into why Apple Pay as a system is more important than most people realize (and harder to copy than people think).

            Of course, as you’ve pointed out, if you want some amount of customer data stored by various merchants in order to provide a shopping experience that you want, that’s fine. But you are increasing your risk by accepting those terms. For me, I want as anonymous a system as possible, and that would seem to be Apple Pay and only Apple Pay, for now. Others may follow Apple’s lead, but currently the status quo is merchants gathering various levels of data and storing that. At minimum its your account number, but in many cases it is likely quite a bit more than that.

          36. “You can look at the info provided by MCX and see that the data shared back to the merchant is much more than just the account number. I”

            What’s MCX and CurrentC? Not everyone lives in the US and therefore affected by its invasive laws. This does not affect me or our discussion.

            “Apple Pay is an anonymous system and makes it impossible for the merchant to get your account number”

            Dude, if people can trace your account number, they can trace the token to you too. Are you that naive? They also have you on tape, tied to an exact time and terminal! Are you that hypocritical?

            At least we reached an agreement, the only difference is the account number or whatever card identifier may be presented to the merchant? Because giving up that information is worth not giving my purchase history to Apple, who is in bed with the NSA. It’s also a far cry from “my personal data” outrage you displayed earlier !! Give it up man! You’re clearly wrong about this.

            So far, you barely explained why it’s more secure. Ignoring the fact that I’m not convinced, you didn’t even explain why it’s more convenient or intuitive than a contactless cards. This argument is Apple Pay Vs contactless usage, not just security .

            Again, do you even use contactless every day?! Because I do. And my phone would be much more inconvenient.

            And you still didn’t explain how exactly Apple knows how much it needs to be paid if it doesn’t know your transaction history. I can handle some asymco comment.

          37. “What’s MCX and CurrentC? Not everyone lives in the US and therefore affected by its invasive laws. This does not affect me or our discussion.”

            It does actually. It is clear that different payment systems gather varying amounts of data. Some are more invasive and some are less. You don’t know until you check the system you actually use. You’re being very naive if you think just using a contactless card protects you.

            “Dude, if people can trace your account number, they can trace the token to you too.”

            Nope, that isn’t how it works.

            “At least we reached an agreement, the only difference is the account number or whatever card identifier may be presented to the merchant?”

            Wrong again. Each payment system will be different.

            “Because giving up that information is worth not giving my purchase history to Apple”

            Incorrect. Apple doesn’t get your purchase history.

            “And you still didn’t explain how exactly Apple knows how much it needs to be paid if it doesn’t know your transaction history. I can handle some asymco comment.”

            I doubt that you can. You’ll just dismiss it. You already have a set of beliefs about this issue, and you’re simply not listening to anything that contradicts what you want to believe. But sure, here’s the comment, originally posted by ‘Martin’, it’s a very detailed technical overview:

            —–
            Apple’s system is quite secure.

            The bank issues a token (a credit card alias) and some kind of private security key that resides in the Secure Enclave. The POS terminal receives the token and a cryptogram that is an encrypted version of the token. The cryptogram is unique per transaction. It cannot be unique per merchant because the iPhone doesn’t know what merchant it is at. Chip+Pin generate repeating cryptograms because the cryptogram is generated by the POS terminal and use a different algorithm. How Apple varies the cryptogram isn’t clear but the transaction system must be able to invalidate already used cryptograms, so either an encryption chain (using each cryptogram to salt the next one so everyone who knows the private key and the last few cryptgrams can predict what the next ought to look like) or a time-based one like an RSA Secure ID. I suspect the latter because the system encourages competition of TSPs and encryption chains would require they coordinate. The time-based solution doesn’t. I happen to know that Apple’s secure element chip is a custom design, unique to Apple, and suspect it is keeping an independent clock synced with a common server which all Token Service Providers (TSPs) use as well. There are other ways it could work, but it’s probably not terribly important.

            The token+cryptogram are sent with the payment information through the acquirer and to the TSP (who can be the network processor, the issuer, or a 3rd party – but not the acquirer or merchant). The TSP decodes the cryptogram and validates the token. The token is then sent to the issuer who correlates it with your Primary Account Number (PAN) and clears payment. The token and clearance are then passed back up the chain to the merchant.

            The token is in the clear, but since it’s not a PAN, it can only be processed after the TSP validates the token using the cryptogram. The difficulty of generating an expected cryptogram is the key to the system. That the process of generating the cryptogram securely on entirely on the iPhone or Apple Watch (the watch has all of the elements needed to do this) and not the POS, is how this system can work with equal security inside apps or eventually via the web.

            But none of that is actually all that interesting, as it happens. It’s somewhat more secure than chip+pin for card-present transactions, and definitely more secure for online, but the real innovation here is on the other end. Most people think about security in too narrow a way. Think of a key and a lock. We focus intently on making sure the lock can’t be picked and if we achieve an unpickable lock determine that we’re secure. But we’re not, because we haven’t secured who gets to have a key. The key can be loaned, stolen, lost, duplicated, and all sorts of things and security broken. That’s the side of the problem that is currently failing the worst. Kevin Mitnick didn’t find loopholes in computer systems, he just conned people out of their passwords – he simply coped the key rather than try and pick the lock. In Apple’s system the key is two entirely different things than the PAN – the token and the primary key. That’s true for Google wallet as well – but the innovation in Apple Pay is who controls those things and who has access to them.

            Almost every existing payment network requires the banks to trust a 3rd party to perform ID&V (identification and verification). The merchant needs to check your signature, or a photo ID, or the PIN, or whatever. That’s not bad for card-present, but online it’s impossible. Even with chip+pin you’re still giving Amazon your PAN and security code, and that’s the information that just got stolen out of Home Depot, so chip+pin doesn’t really buy you that much. The bank is trusting Amazon to verify you are who you claim. That’s also true for Google Wallet. And the banks are trusting them to not lose that information once the acquire it.

            What Apple does is create a secure connection from your device to your bank. Apple is not a middle man here. The bank gets to completely control the ID&V. Once they are convinced you are the rightful card holder, they electronically place the token and private key into Apple’s secure enclave. Here’s the important part – you can’t see it or get it out. You can delete it, but you can’t change it and you can’t share it. So you can’t be phished, or social engineered or any of the other ways that this information gets out. The only way to get it out of an iPhone is with your fingerprint – which you can’t share, post online, etc. You MUST have physical access to the authorized phone to unlock the token and generate the cryptogram. The bank doesn’t need to trust anything more than Apple’s hardware security layer. There’s no network to compromise, no way to skim the information on the way to the POS or anything else like that. That’s revolutionary and that’s what Apple brought to the banks. It gives the banks control they never had before and it creates a system that is almost impossible for the end user to compromise. The most you could do is approve someone else’s fingerprint onto your phone.

            There’s nothing proprietary on the POS side of things – they’re building on top of a bunch of existing systems. That’s too much infrastructure for Apple to try and replace. The network processors have some work to do here, but there aren’t that many of them. The banks have a LOT to do here, but they’re getting all of the benefits. The TSPs need to be created, but that’s easy. Apple is also building customer support systems with the banks to ease any problems there (much like Apple built with the carriers). This is designed to overlay on chip+pin and fix many of its flaws without competing with it. Cleverly designed.

            Apple has a variation on this as well where Apple plays the role of the issuer. They issue a token that represents your AppleID. When you pay with the ‘Pay with Apple’ option, it sends the transaction to Apple to approve, who then looks up your credit card number (those 800 million on file) and generates a 2nd, standard transaction and sends the results of that transaction back up to the merchant. This is how Apple gets small banks on board at launch – your little credit union may not yet be participating, but Apple can still process their card as they always have when you bought an app or a song. It also means that user uptake should be much higher as every existing Apple user buying an iPhone 6 will already be set up to buy stuff using the card they’ve already given Apple. This is a powerful arrangement.

            But here’s what everyone is missing:

            Apple built a generic, almost foolproof device-level identity security system around TouchID, Secure Enclave, and custom secure element hardware at the lowest level of iOS that can be opened up to pretty much anyone Apple wants to let in. This is unique, and I don’t see anyone else who can replicate this. Apple is merely renting this security service out to the banks for the price of a percentage of the transaction. They don’t need to build a proprietary payment network, or even be a link in the payment chain. And this system can work equally as well for health providers securing user identity to exchange HIPAA covered health data for Healthkit (for a modest fee, naturally). They can rent it to employers to secure their employee identity – not just for getting into corporate applications but add HomeKit into the mix and a company can put an NFC lock on a door, issue tokens to the iPhones of the 10 employees allowed into that room, and that gives them the ability to unlock the door with their iPhone following a positive fingerprint check. The employer can remotely revoke those tokens as needed. This is effectively a way to replace username and passwords for anything from your iPhone or Apple Watch, if Apple builds it out to its full potential. It relieves the burden of choosing good passwords, remembering them, securing them, and puts all of the control on the agency that needs to control the security, rather than on the one being secured. The recent partnership with IBM might make more sense now.

            Apple has spoken quite a lot about privacy the last few days. They’ve deleted their own copies of encryption keys that would let them get access to our devices. I don’t think this is coincidental, nor do I think it’s a message to users. I think it’s directed at the banks, health providers, and other companies that Apple is looking to build services for, telling them that they truly have a secure place in our devices to store identity credentials. And Apple can speak about not wanting to monetize our data, because that doing so would completely undermine the effort.

            Samsung cannot easily follow this. They could do the SoC work that Apple has done without any real effort, but they would also need to build or aquire a biometric interface of adequate reliability. They exist but are quite expensive and would be difficult to justify at Samsung prices. Apple bought the company that developed the relatively cheap one. But Samsung would need low-level access to Android, and while they have that, they don’t control it. The carriers also see that code, and Google exerts a fair bit of control as well. It’s why Google rebuilt Google Wallet around an app-level, software only, networked approach (what Apple does in hardware on the iPhone, Google does in the cloud and sends you via WiFi). But it was the only way Google could retain complete control over it. Samsung could do it in Tizen, but not Android. Amazon could do the software, but not the SoC and they’re less likely to be able to do the sensor. Google could in their hardware, but they sell so little of that. Microsoft could, but same problem.

            Apple patented this idea in 2009. They’ve been working on it a long time. The bought AuthenTec to get another piece in. Bringing their SoC work in-house helped to do this. They’ve hired countless financial services people to do this. And they’ve been working with the banks for at least a year on it, and I believe they’ve been running a closed subset of this system to secure their 800 million cards-on-file for several years (I believe Amazon is doing this as well).

            This is much bigger than mobile payments and Apple’s head start is enormous. I think some cheap clones of this system are possible within 2-3 years, but I can’t envision a path for anyone to match, let alone pass Apple. Nobody controls the OS, SoC, sensors, and infrastructure like Apple does. Oh, and this should allow Apple to virtualize the carrier SIM. That’s important in many scenarios, particularly that enterprise one above. A current or future iPhone may be able to carry multiple virtual SIMs to allow it on multiple carriers. That’s important in some geographic regions, but it also allows enterprise to have clean separations of work and personal data. An employer should be able to have a carrier ID provisioned to them and then pushed out to a phone just like a token (or revoked), without any physical access needed. Apple has a patent on that as well.
            —–

          38. “Nope, that isn’t how it works.”

            If you have access to account numbers from a bank, you have access to the token system. It’s that simple.

            “Incorrect. Apple doesn’t get your purchase history.”

            Officially…. Adding a middleman to your purchases that you know worked with the NSA, is a risky element.

            “I doubt that you can. You’ll just dismiss it. ”

            Well… The comment only explains how tokenisation works, what’s the big deal? It’s nothing different to chip and pin or contactless. They are all tokens, Apple didn’t invent this. Why are you not getting this?!

            Plus, it didn’t explain how Apple knows how much it needs to charge the banks!!

            And you still didn’t explain how it’s more convenient!!

            And the “personal data breach” you preached is nothing more than a card identifier at best, hardly the end of the world you thought it would be.

            Give up, there’s no PERSONAL information given away by contactless cards, even if what you’re saying is right. I really can’t find your address if you give me your account number.

          39. “If you have access to account numbers from a bank, you have access to the token system. It’s that simple.”

            Seems like you didn’t read the entire comment, or perhaps skimmed it. Here’s a key bit:

            “What Apple does is create a secure connection from your device to your bank. Apple is not a middle man here. The bank gets to completely control the ID&V. Once they are convinced you are the rightful card holder, they electronically place the token and private key into Apple’s secure enclave.”

            This answers your question about “how Apple knows how much it needs to charge the banks!!” And it answers your questions about Apple getting your transaction history, as well as your concern about the NSA.

            The comment explains a lot more than just how tokenization works. I don’t think you actually read it.

            Also, why are you quoting “personal data breach”? I never said that. I also never said anything about the end of the world. Could we please not resort to fabricating quotes?

            “Give up, there’s no PERSONAL information given away by contactless cards, even if what you’re saying is right. I really can’t find your address if you give me your account number.”

            We’ve established that card providers do share information back to the merchant, that’s just how it has always worked. Apple is disrupting this by creating a kind of anonymous pipeline from your device to your bank.

            The best case scenario is that a merchant only has some kind of card identifier. But it is incredibly naive to believe that is going to be the case all the time. I’ve already given you a number of direct quotes from the policy info of card providers that proves they share much more information with the merchants.

            What you’re missing is all the info you gave to the card provider in order to get the card in the first place, and that is tied to the card identifier and account number.

            It is possible some contactless cards are actually anonymous like Apple Pay. They certainly could be if they wanted to, I think. There may be some technical limitation I’m missing re: cards. But all the info we’ve seen from the card providers says they are not operating anonymously, the card providers are telling us what info they share with the merchant. We know that Apple Pay is operating anonymously and not sharing info with the merchant.

            As for convenience, tapping your iPhone is about the same as a contactless card. Although my card is in my wallet, probably slightly more work to get it out. Of course if you’re in line to pay for something you’ve probably got your method of payment ready to go. So it’s tapping your iPhone or tapping your card. I’d say that’s pretty much the same. Chip+PIN clearly loses on convenience though.

            Where Apple Pay becomes more convenient is in the extensibility of it. And for me, the security and privacy as well. For you, obviously your are fine with merchants gathering some data as you shop. To each his own. So the added security and privacy of Apple Pay are not a plus for you. They are for me. But back to extensibility, this is important, going forward you’re going to be able to do some very interesting things with Apple Pay that are simply not possible with cards. Today a contactless card and Apple Pay are roughly equivalent in convenience (Apple Pay wins on security, privacy, extensibility), but tomorrow cards will not be able to keep pace. I would think this is obvious, software wins.

          40. “This answers your question about “how Apple knows how much it needs to charge the banks!!””

            You completely misunderstood what I asked. I’m not asking the current purchase charge, I’m asking about Apple’s commission on every purchase. How does Apple know much it needs to be paid from Apple Pay? Not how much the user needs to pay the merchant.

            This makes me wonder what else have you misunderstood. Come to think of it, quite a lot, since you keep repeating yourself.

            “Seems like you didn’t read the entire comment, or perhaps skimmed it”

            Apparently, you’re skimming my comments.

            “Apple is disrupting this by creating a kind of anonymous pipeline from your device to your bank”

            And leaving out the card providers? Similar question to the one before, how will Visa know how much money to charge the bank?

            “But all the info we’ve seen from the card providers says they are not operating anonymously, the card providers are telling us what info they share with the merchant. ”

            Worst case scenario, the only data they share is what printed on the face of the card. Information that cannot be traced to an individual, unless you issued the card yourself. The information on an NFC card is quite limited you known.

            The very existence of loyalty programs proves that merchants don’t have access to the data they need, they can’t trace your purchases and they don’t know who you are or your date of birth or your address. Which is why they ask you to join! Otherwise, according to you, merchants are throwing away 1% of their entire revenue for no additional data whatsoever. Your story doesn’t hold up.

            “But back to extensibility, this is important, going forward you’re going to be able to do some very interesting things with Apple Pay that are simply not possible with cards”

            Like what? You said it yourself, Apple doesn’t store anything to extend the software. And even it does, you lose your “privacy”. I don’t get the future you see.

            “As for convenience, tapping your iPhone is about the same as a contactless card”

            Right… because the phone is conveniently fully charged and with 4G all the time /s Not to mention it’s much bigger. You don’t think size/weight don’t make a difference, but it does. Some terminals are not directly in front of you. You clearly have no experience in contactless payments beyond McDonalds once a week.

            Again, do you use contactless on a daily basis to tell me it’s not more convenient?

          41. “You completely misunderstood what I asked. I’m not asking the current purchase charge, I’m asking about Apple’s commission on every purchase. How does Apple know much it needs to be paid from Apple Pay? Not how much the user needs to pay the merchant.”

            The snippet I highlighted answers this question as well.

            “And leaving out the card providers? Similar question to the one before, how will Visa know how much money to charge the bank?”

            See the same previous snippet, again.

            “Worst case scenario, the only data they share is what printed on the face of the card. Information that cannot be traced to an individual, unless you issued the card yourself. ”

            Almost correct. The card issuers state clearly that they share info back to the merchant. Some share more than others. You really have to check the policy of your specific card.

            “The very existence of loyalty programs proves that merchants don’t have access to the data they need”

            Nope. It only proves that merchants want as much data as they can get.

            “merchants are throwing away 1% of their entire revenue for no additional data whatsoever”

            No, they’re trading a percentage for even more data. More is always better.

            “Like what? You said it yourself, Apple doesn’t store anything to extend the software. And even it does, you lose your “privacy”. I don’t get the future you see.”

            Yes, it is obvious you don’t get it. And no, you don’t automatically lose on privacy as Apple Pay is extended. Privacy is a big part of the reason Apple Pay can be extended. Much of that long, technical comment is about this exact subject. I think your question here proves you didn’t read it.

            “Right… because the phone is conveniently fully charged and with 4G all the time”

            Yet another piece of incorrect info. Apple Pay does not require a connection. I’ve posted details in other comments here. I’m not going to go over the basics with you yet again.

            “Again, do you use contactless on a daily basis to tell me it’s not more convenient?”

            There are contactless cards in Canada, but chip+PIN is much more common right now. I use chip+PIN. It’s not very difficult to imagine simply tapping instead of inserting. I never said Apple Pay was more convenient, by the way, I said it was as convenient with many advantages.

            This is getting tedious. For whatever reason you’re against systems like Apple Pay, and yet that is clearly the future. I grant you the last word.

          42. Maybe this wouldn’t get tedious if you stop hopping around the bush and answer straight questions that are still unanswered.

            We also got from “your data”, to “your purchase data” to your “card identifier”. Do much for added privacy, you were so far off that.

            This is like arguing with someone that uses a feature phone about Android vs iOS. You never used either technology but “clearly” you know the future. Clearly.

        1. And a card is immune to dead zones. Not to mention battery life… 😉
          Anyway, it shouldn’t be an either/or situation. The phone can consolidate cards, in case you forget your wallet.

  3. All banks are not equal. Anyone who banks at a Savings Bank or Credit Union will understand. The predatory practices of banks like Bank of America are untenable to many people (including me). I would never switch banks for something as trivial as somewhat faster payments at a retail store.

    1. “All banks are not equal” – jamesdbailey

      True. Banks may have other weapons with which to retain their clients. However, I believe that Apple Pay — and other services like Apple Pay — will distance Banks from their customers and make them more of a commodity.

  4. 15 years ago the telcos thought they were going to be the face of the connected world, but they ended up providing the “pipes” (a capital intensive regulated business that runs a very sophisticated infrastructure asset, but that is not nearly capturing the share of value that was once expected).

    I see the same risk for banks. If they are not the face of the product then the customer’s allegiance will be with Apple and they will end up merely providing the pipes for Apple Pay.

  5. Dear John,

    Search this site for all articles you’ve written. Read them all. After completion, please respond with how anyone can take you as anything *other* than a complete Apple zealot, completely incapable of anything other than absolute pseudo romantic affection for them.

    PLEASE begin to at least shade your bias at least a little bit, or change your description to “I will only write why I think Apple rulez.” No one is interested in another article entailing you smooching Tim’s fanny.

      1. “Focus” is fine. Your complete obsession with Apple, coupled with your inability to find fault in a single thing they do/sell/etc, is where you are quickly losing credibility with readers. A cursory glance through the comments of your last 4 blog posts should be all you need to validate my point.

        I eagerly await a glib and arrogant response 🙂

        1. “If you can’t annoy somebody with what you write, I think there’s little point in writing.” ~ Kingsley Amis

          I’ll let you be the judge of whether the above is sufficiently glib and arrogant.

          1. Glib…glib…hmmm…
            That’s right! They’re the Linux system libraries from the Gnome project!
            Yeah, there’s no way Falkirk is glib…
            🙂

  6. @FalKirk:disqus
    While Apple Pay may be a great service but i do not believe that it will be as much of a big deal as you suggested John

    the merchant would be stupid to let Apple become the middle man and make money on their backs with their consumption while achieving more influence over them in partnership with the Banks that may result in Higher Fees to them.

    1. Apple’s tiny cut (1.5 cents per ten dollars) comes from the banks, not the merchants. The banks are happy to pay that cut because of the lowered risk of fraud, there’s no indication that they will be passing it on to the merchants in the form of increased fees.

      1. Business 101: never let a middle man comes between you and your consumer

        you may be right about the Fees today, but there is no indication that this will never happen either in the future, especially if Apple Pay becoming very popular, and Apple becomes the de facto gatekeeper between the merchant and their consumer,

        there is no evidence to suggest that somehow Apple will never ask for more cut and more concession in the future, especially when they are notorious for using their power to bully their partner into giving them more concession to their own advantage only

        1. “especially if Apple Pay becoming very popular, and Apple becomes the de
          facto gatekeeper between the merchant and their consumer,”

          Not going to happen. Unless your crystal ball forsees a future in which Apple has achieved total market dominance in the smartphone market. Because Apple pay only works on apple phones. Apple is a premium luxury brand. Which means they cannot ever become a monopoly. Which means they will never be in a position to dictate terms as draconian as you fear they will.

          You can’t have it both ways — if Android has “won” the market share war, then Apple will never be in a monopoly position. If you fear that Apple will become like a monopolist, raising prices and start squeezing everyone for more and more money, then you must feel that they are going to destroy Android and become a monopoly player like Microsoft was in the late 90’s.

    2. Kenny, you’re right that the merchants have the least to gain from Apple Pay and that is why some of them are resisting it. However, they do have certain incremental gains such as reduced lines and another form of making purchases (which is always a good thing).

      As Glaurung-Quena already pointed out in his comment, the retailers pay nothing to Apple and, in fact, the amount the banks pay to Apple is more than made up for in lower fraud expenses. What the Retailer loses when Apple Pay is used is customer data which is very valuable indeed. However, it is valuable to the Retailer, not to the customer.

      “The easiest … incumbent to disrupt is the one prioritizing the needs of its strategy over the needs of its customer.” ~ Aaron Levie (@levie)

      1. I will agree that Apple Pay is more secure and more convenient for mobile user but i do not believe that it is faster than contact less credit card.

        this is not necessarily a matter of Fees, but rather not to let Apple becomes the gatekeeper between them and their consumer, while deciding in partnership with the Bank their own enemy the form of payment to use in their own store.
        that’s common sense Business 101. that’s something you should know as a business coach

        every company in this planet is guilty sometime for prioritizing the needs of its strategy over the needs of its customer in that include Apple.

      2. This is not about money, it’s about control. That’s where the real money is. It’s about the influence of a third party on a two party transaction. You could say the banks and credit card companies fill that role now. With Google or Apple, or whoever. there’s one more mouth to feed, one more voice to hear, one more child to appease, for little to no incremental benefit over existing methods.

        Most importantly, It’s about the data. It’s about Apple “collectively bargaining” with merchants on behalf of it’s users. This gives Apple a disproportionate measure of influence, as a third party, over a transaction. We’ve already heard the “boycott CVS” war cry. And this is just the beginning. Smart for Apple, why would the merchants allow it?

        1. “It’s about the influence of a third party on a two party transaction.”

          In what world of elves and fairies is the current payment system a two-party transaction? In fact, in what world is any payment system other than cash a two-party transaction? Payment systems are all about a group of entities all elbowing in between the merchant and the customer, looking to extract their slice of the pie in exchange for providing financial plumbing. At a bare minimum, you have the merchant’s bank, the customer’s bank, and some kind of interbank infrastructure provider. If the payment method being used is not issued by the same bank that the customer has their checking account with, then you’ve got three banks in there, plus the plumber. And a small merchant is probably also paying yet another entity (not necessarily their bank) for the ability to accept the payment method (ie, rental fees for the terminal where you swipe your card).

          That’s a lot of middlemen elbowing into an ostensibly “two party” transaction. Even with systems set up by merchants (CurrentC, for instance), you get a middleman (MCX for CurrentC) to handle the financial plumbing. Here in Canada, the debit card middleman (Interac) established specifically to be a non-profit plumber, has turned on its creators has been trying to get permission to reincorporate itself as a for-profit entity. Thankfully it’s application to start taking a bigger cut for itself has been denied by our federal Competition Bureau.

          “there’s one more mouth to feed, one more voice to hear, one more child
          to appease, for little to no incremental benefit over existing methods.”

          Please try not to let your dislike of Apple make you stupid. Apple went to the banks and offered two things: to reduce the friction of paying with a credit card (which the banks well know will help increase the number of credit card purchases, and thus their profits), and to *vastly* reduce the risk of fraud by adding two factor authentication, and by removing access to the credit card number. In return for these services, Apple asked for a truly miniscule fee, compared to the usual cut demanded in the payment processing world. The banks were more than happy to say yes.

          1. “In what world of elves and fairies is the current payment system a two-party transaction?”-Glaurung-Quena

            Perhaps you missed this…
            “You could say the banks and credit card companies fill that role now.”-klahanas

            “Please try not to let your dislike of Apple make you stupid.”-Glaurung-Quena

            I don’t believe I limited myself to Apple.
            Since you partially quoted, it was like this…

            “With Google or Apple, or whoever. there’s one more mouth to feed, one more voice to hear, one more child to appease, for little to no incremental benefit over existing methods.”-klahanas

            Miniscule fee? They win if they get no fee. This is about control, remember?

            Edit: What’s good for the goose, is good for the gander. I’m a fan of neither, but you fail to convince me on why the merchants shouldn’t resist. I just highlighted some reasons as to why they should.

          2. “for little to no incremental benefit over existing methods”

            You are indeed letting your dislike of Apple cloud your thinking. Little or no benefit over existing methods? That. Is. Ridiculous. Security alone is enough benefit. Privacy is yet another (Google might not qualify on this benefit though). Reduction of fraud which benefits everyone. The user experience (probably only Apple Pay counts here, for now). Jobs to be done we can’t even imagine yet. Come on, this is one of the most ridiculous statements you’ve ever made. You’re like an old man ranting about the introduction of the rubber core golf ball, noooooo, progress!

          3. “You are indeed letting your dislike of Apple cloud your thinking.”

            Did it ever occur to you that I might have a suspicious outlook for merchants, banks, and credit card companies? I see things strictly from a pro-consumer point of view.

            I did not single Apple out. I made that perfectly clear (twice). I know you have difficulty with that, but I also know only Apple exists in your psyche.
            A little farther up I commented that cards and phone payments are not mutually exclusive. They both have benefits and drawbacks.

            Cards:
            Con: Need to carry many of them.
            Pro: Secure. Don’t depend on network quality. Battery life isn’t applicable.

            Phone Payments:
            Pro: Can consolidate cards.
            Con: No signal-no pay. Battery out-No pay.

          4. For cards you forgot to add the customer data that is gathered by the merchant when you use those cards. That’s a clear con for the consumer. Cards are also less secure. I would agree that cards are quite secure, but a system like Apple Pay is more secure, and more private. Not to mention more flexible and robust as we move to services tied to identity.

            As for your cons on Apple Pay, my understanding is a signal is not required to use Apple Pay. Perhaps other systems do require a connection? Ah, from a CNET article:

            —–
            “What if I don’t have phone service?
            It doesn’t matter. Your payment information is stored on your phone in the SE chip. You could even switch to Airplane Mode and still make a purchase because your iPhone doesn’t need to contact anyone since all the info is onboard.”
            —–

            On battery life, don’t iPhones already conserve some amount of ’emergency reserve’ power? Perhaps someone else can answer that question, but I would think it’s a fairly easy edge case to solve.

            So your Apple Pay cons are pretty much lame ducks.

            The issue here is you seem to be against systems like Apple Pay simply because Apple is now doing it, and you’ve gone so far as to make the ridiculous statement that there is “little to no incremental benefit over existing methods”. Simply put, you are wrong.

            If you are pro-consumer you should love Apple Pay and hope that others move quickly to copy it.

          5. Nothing keeps my privacy better than cash, though I do agree that the info is the real incentive for the payment provider.

          6. Personal info is what the merchant wants. And probably Google. Apple doesn’t need your personal data since that’s not how they make money. Apple has a strong financial incentive to protect your data.

            “Nothing keeps my privacy better than cash”

            Early adopter you say? I don’t think so. Not if you’re seriously arguing that carrying cash is a superior system of payment. What’s next, are you going to shake your fist and yell “Get off my lawn!”

            You also haven’t addressed your mistakes on the cons of Apple Pay.

            Look, Apple is creating the future of your technology, whether you like it or not. I don’t see how Google can now move forward with a system that isn’t as secure and private as Apple Pay. But who knows, maybe they’ll still try.

            From the current privacy statement for Google Wallet: “When you use Google Wallet to conduct a transaction, we may collect information about the transaction, including: Date, time and amount of the transaction, the merchant’s location, a description provided by the seller of the goods or services purchased, any photo you choose to associate with the transaction, the names and email addresses of the seller and buyer (or sender and recipient), the type of payment method used, your description of the reason for the transaction, and the offer associated with the transaction, if any.”

            Cripes! That’s actually worse than I had imagined.

          7. I’m arguing that cash is a more anonymous, off the grid, method of payment. Ask any criminal.

            Anyway, being able to pay, is something I can currently do. Far more Important to me is having the money to pay, and how much I’m paying. Whether it’s smartcard + PIN, or phone, or cash, or credit card, or check is far less important to me.

            Smartcard + PIN is in principle the same as using Softcard or Apple Pay. Where they might differ is who gets the information, if at all.

            By the way, thanks for pointing out that the iPhone can be off line. I didn’t realize that. In which case, it’s acting just like a smartcard, except that the second authentication is via fingerprint instead of PIN. To me that’s marginally better in ease of payment. You might have a point on privacy advantages. Does a Smartcard afford the same privacy advantages?

            You don’t see me being supportive of any of these leeches, do you?
            By the way, I was bored in a meeting when I first answered you. 🙂

          8. “Whether it’s smartcard + PIN, or phone, or cash, or credit card, or check is far less important to me.”

            It should matter to you. The better the system the more everyone benefits. Imagine if everyone paid by cheque in the concession line at a baseball game. Madness! Time savings is but one benefit of a better payment system.

            “Smartcard + PIN is in principle the same as using Softcard or Apple Pay.”

            None of these are the same as Apple Pay. There are important differences in convenience, security, privacy, and extensibility.

            “Does a Smartcard afford the same privacy advantages?”

            My understanding is all cards allow merchants and others to gather data about you in much the same way Google Wallet does. Much of the backlash against Apple Pay is driven by Apple’s protection of your personal data. The “leeches” don’t like Apple Pay. But you and I should love it. You especially should hope that Apple Pay forces Google to implement a system that is better for consumer privacy.

          9. “Imagine if everyone paid by cheque in the concession line at a baseball game. Madness!”

            I agree, it would be. Is that how it is now, or last year, or ten years ago, or…ever?

            I will tell you this, what will make me stand in line is not an iPhone. It would be necessity, or just too fantastic a deal. Which brings me back to the prior point, how I pay is secondary.

            We’ve never had privacy with credit cards. This is an opportunity to correct this, but with merchants involved, and banks and credit card companies, I doubt it. It’s the merchants that won’t let these kinds of payments to succeed.

          10. “We’ve never had privacy with credit cards. This is an opportunity to correct this, but with merchants involved, and banks and credit card companies, I doubt it. It’s the merchants that won’t let these kinds of payments to succeed.”

            Well, that’s too bad for the merchants then, Apple Pay is already succeeding, and your data stays private. The merchants won’t have much of a choice, Apple’s demographic is just too valuable. Long term this will be good for you. Just as all PCs work pretty much like the original Mac and all smartphones work pretty much like the original iPhone, I expect payments to all eventually work pretty much like Apple Pay. I suppose the question is whether Google is willing to give up gathering that specific data. If they’re not then you’ll have to make a choice. Apple and privacy or Google and giving up your personal data.

          11. “Do you really think that not accepting Apple Pay will prevent enough people from buying?”

            Merchants will take enough heat, yes. I don’t expect merchants will be able to stop Apple Pay, even if they want to.

            “Imagine if they had the same zeal for real problems”

            I would think many Apple customers are solving real problems all the time. What a ridiculous comment.

            And what exactly does a kid using the finger of a sleeping parent to unlock an iPhone have to do with using Apple Pay at retail locations? Couldn’t you simply turn off Touch ID for Unlock when you go to bed and revert to a passcode? If you’re really worried about people in your own house abusing your device and accounts, then you need to lock them out. Seems like that’s pretty darn easy to do, and there would be many ways to do it.

          12. “I would think many Apple customers are solving real problems all the time. What a ridiculous comment.”

            True. Most likely the ones that aren’t out there solving first world problems, like payment convenience, and the best they can come up with is marginally more convenient.

            “And what exactly does a kid using the finger of a sleeping parent to unlock an iPhone have to do with using Apple Pay at retail locations?”
            Biometrics aren’t “all that”. That’s all.

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