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Apple's 'iWallet' payments seen as unlikely to earn much money, but will lock in users to iPhone...

post #1 of 71
Thread Starter 
In looking at the potential options for Apple in launching a mobile payment platform, one analyst believes the company is most likely to start small and safe with a "proxy" approach -- a strategy that wouldn't make Apple much money, but would help lock users into the company's iPhone ecosystem.

Touch ID


Rod Hall and his team, along with the Computer Services experts at investment firm J.P. Morgan, looked into how Apple might debut its so-called "iWallet" service. They came away with the conclusion that the company is most likely to offer a credit card proxy system that would allow people to carry virtual versions of select credit cards on their mobile devices.

If Apple does use this approach, Hall expects the company would collect a small transaction fee, maybe around a penny per use. He also does not expect that Apple will include debit cards initially, due to more stringent regulation of such cards, and due to the fact that debit cards are directly tied to bank account funds.

In this scenario, even if all 444 million iPhone users were to utilize "iWallet" for 100 percent of their credit card transactions, Hall estimates that the penny-per-use sum would lift the company's earnings by just 0.5 percent, or 4 cents.

In that respect, Apple's anticipated mobile payment system is not expected by Hall to have a significant effect on the company's bottom line. In a note to investors on Friday, a copy of which was provided to AppleInsider, he indicated he believes Apple's rumored payment system is more about locking users in to the iPhone and larger iOS ecosystem, making it harder to leave for competing platforms like Google's Android.

The so-called "proxy" approach wouldn't be Apple's only option for a mobile payment system. Hall noted that Apple could also become a merchant of record, which would require it directly interact with merchants --?an approach that seems to the analyst like it would be too complex for Apple to want to attempt.



Finally, he said Apple could become a full-fledged credit card issuer, which offers the most attractive economics. In Hall's estimates, this approach could add about 11 percent to his 2015 earnings per share forecast, but he also views this as the least likely method for Apple to take.

In this method, Apple could either become a bank, or find a bank partner to co-brand with. Both methods would open the company up to regulation.

Apple would either be required to extend credit to users, or offer a reloadable pre-paid debit card account, and Hall believes the latter makes the most sense. But he's not convinced that consumers would willingly pre-fund an Apple account to make credit card purchases, and he doesn't think Apple would ever want to take on credit card risk.

"Neither seems particularly likely to us," he said.

This week, it was said that Apple negotiated lower transaction fees with five credit card issuing banks as part of the company's behind-the-scenes efforts to debut a new mobile payment system. The service is expected to be tied to a new near-field communications chip and secure enclave located inside not only the upcoming "iPhone 6," but also the company's anticipated wearable "iWatch."

Apple is said to have obtained a "card present" status, resulting in lower fees. The credit card issuers are said to have agreed to this in exchange for Apple assuming some of the risk by requiring Touch ID fingerprint authentication for each purchase.

In addition to issuers, recent reports claim Apple has signed deals with American Express, Visa and MasterCard for the payments, bringing the world's top credit card companies onboard for an apparently imminent launch.
post #2 of 71
This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

Visa/Amex/Mastercard/Discover have total revenues of $60B a year
They have total profits of almost $20B a year
You dont think Apple can take a huge chunk of that?
Edited by sog35 - 9/5/14 at 6:17am
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post #3 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

 

Exactly!

 

The profit margin on each transaction fees would be phenomenal!  Just look at Google's AdWord revenue from $0.01 per click and Google generated 50 Billion in advertising revenue in 2013.

post #4 of 71
Any comment / prediction about an Apple venture 'not earning much money' has to be made by someone who is pretty brave. Even their 'hobbies' usually end up making more than many Fortune 1000 companies. Not to mention the increase in sales of other Apple products that so often result because of these new ventures.
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post #5 of 71

Apple already has 900,000,000 creditcard accounts.

 

Imagine if Apple releases a digital Credit card with Apple rewards.  The sign up would be off the charts.  Get 1% of your purchases to use on iTunes or Apple retail?  Awesome.

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post #6 of 71
So a little like iTunes, then.
/s
Edited by paxman - 9/5/14 at 6:56am
post #7 of 71
What lock in?

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

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post #8 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do..

I agree with your whole post, but I'd like to focus in on this part, because Apple doesn't do anything small and build it up... unless he meant start with only one country like the USA or one continent, and then add more countries etc as they roll out their new deal...

When Apple sets out to disrupt an industry, they do it in style and then move fast enough to keep everyone else from catching their breath or getting their balance. In addition, Apple has enough cash (in the USA and abroad) they could be a bank, but I suspect they will use their liquid cash to back a major bank and let the banking people do what they know and Apple will stick to what they know best.

I think the president of Samsung will have his number one son digging a bigger hole out behind the offices to bury their not-too-smart phones in... Between this program and the IBM partnership, enterprise will be want to do business with Apple in the broadest possible way.
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post #9 of 71
About Apple offering a 'prefunding' service to an Apple account.

Doesn't this completely remove all borrower risk? And also, doesn't this making giving money form one individual to another very easy?

If true, Apple could offer the account owner a slice of the pie - 1 to 2% off all purchases wherever the 'card' is presented.

What's your view of this prefunding only possibility? Does my view of the matter have legs?
post #10 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

Visa/Amex/Mastercard/Discover have total revenues of $60B a year
They have total profits of almost $20B a year
You dont think Apple can take a huge chunk of that?
This is why the stock was down 4% earlier this week. Wall Street clowns pumped up the stock to record highs and then dump it saying nothing Apple does can be meaningful to the top/bottom line. I wouldn't trust any of these clowns to know what Apple might/is do(ing). They think small, Apple doesn't.
post #11 of 71

I work on the ATM and VISA systems for a Canadian bank and let me tell you Apple will collect way more than 1 cent per transactions. Let me give you some examples:

 

Credit card fees:  There is no fee on the card owner side but there is a % of the purchased amount on the merchant side. The merchant side fees can get pretty high.

 

ATM transactions:  In canada, bank will charged pretty high fees unless you take a plan.  It can get really expensive if you dont go to you're bank ATM because the ATM owner will overcharged a fee for himself on top of the withdraw amount. For example, on the consumer side, I could get overcharged $3 on top of paying an extra $1 to my bank if I dont have a plan. On the bank side, the bank only needs to pay $1.5 to the interac network. For example, if a bank overcharge $3 on a transaction made by another bank customer, it will get the interac fee on top of it ($1.5) for a total of $4.5 for a single transaction...

 

Apple normally play hardball on negociations, they will get a lot more than 1 cent per transactions...  A more likely scenario for credit card transactions, Apple will get a % of the fee, not a flat rate.


Edited by herbapou - 9/5/14 at 7:23am
post #12 of 71
They are assuming that is must be just one approach.. They very well could offer Apple Credit and allow you to use existing cards.. Paypal does both.. no reason Apple couldn't...
post #13 of 71
Quote:
Originally Posted by Suddenly Newton View Post

What lock in?

In order to do these digital payments you will need an iOS device with NFC.
if you already have an iPhone then all you need is the iWatch.
If you don't have an iPhone, then you need to buy the iPhone 6 with NFC.

IWatch will not work with Android, it is all about selling more iOS devices.
Apple's goal is to keep adding to the iOS value proposition to justify the higher price.
Many Android users will switch to the iPhone so they can also use the iWatch for payments, health tracking and security.

Apple's competitors have NFC payment systems but they have not caught on because they only understand how to add features.
They don't understand how to create end to end seamless experiences that delight consumers.

My friend was recently telling me how he can't wait to switch back to an iPhone after switching to an HTC one.
He said it was a good device but there were constant little annoyances that made him miss his iPhone.
post #14 of 71
Quote:
Originally Posted by pk22901 View Post

About Apple offering a 'prefunding' service to an Apple account.

Doesn't this completely remove all borrower risk? And also, doesn't this making giving money form one individual to another very easy?

If true, Apple could offer the account owner a slice of the pie - 1 to 2% off all purchases wherever the 'card' is presented.

What's your view of this prefunding only possibility? Does my view of the matter have legs?

Too much work. Normal people don't want to have to keep moving money around to make sure that the next transaction will go through.
Apple likes simple, "it just works".
post #15 of 71
Apple event coming ... Time to select a lazy meme and get some attention. I think "lock in" would. E a good one!

How is this proxy payment concept (if there's truth behind it) "lock in"? Do your purchased items get taken from you if you leave iOS? Do your credit cards stop working?

Do they call EVERY good feature of every product a "lock in" because you lose the feature if you don't use the product?

Sounds like someone wants a way to spin happy customers into something negative. What's wrong with just calling users who get value from Apple features a "cult"? That's a fine tradition!
post #16 of 71

One might note that PayPal gets a significant percentage of each transaction, thus they make a lot more money than someone who's simply acting as an intermediary.

 

Secondly, while I agree that various signs point to Apple getting into mobile payments, it's also possible that the "inked" "card present" deals with AMEX and Visa could simply pertain to lower transaction fees for iTunes and AppStore purchases. Nothing more, nothing less.

post #17 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

 

I wonder how much money paypal would make without ebay sales?

post #18 of 71
I don't expect a payment system around the iPhone will have much impact generally, though Apple might make some money. There is a big security problem in the US regarding debit and credit cards, and an iPhone solution will not even be a blip. Sure many people carry smart phones and a transaction using an iPhone with TouchID might be useful, but as for having an impact on CC security -- nothing.

The US is going to have to change how all transactions are handled. Unless Apple is also coming out with replacement credit and debit card technology, Apple's impact will be minimal.
post #19 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

Visa/Amex/Mastercard/Discover have total revenues of $60B a year
They have total profits of almost $20B a year
You dont think Apple can take a huge chunk of that?

Not for the first 10 years.   Apple is repeating history.   Think 'music.'  Think 'break even.' 

Those profits assume you can plug/replace trillions of transactions... most of those transactions are not done by people who have smartphones or retailers who can handle a digitally secured transaction (simple example...  any mid level restaurant where you hand your card to the wait staff and they take it to the 'Point of Sale', and arguably, the least secure of transaction types... you just gave away all the secrets that protect your account  to a semi-stranger).   It will take some time.

 

but, yes, that's the long game...  but the short game is exactly the crux of strategy

 

Lock them in with the experience... get their cards into the secure enclave, never to be released.  Just like your music library.   

The objective isn't to make money... the objective is to make them never want to leave, or the barrier of leaving is higher than any benefit of leaving.

 

Then the money will take care of itself.

 

This is disintermediation on the order of Apple owning the smartphone customer... once you own them, and exploit the internet, not competing with these players... you're displacing them.

 

It will take some time... to get to VAM's profits... remember, their entrance price (card) is free for most people, and around $100 a year for high value users (hotel/airline branded cards with mileage/points). Apple is depending on people spending some $400-$1000 a year for the privilege of carrying their 'card'.  Apple is only carried today by 20-40% of the smartphone users.   Assume they are 5-20% of the total credit/debit card carrying public.   And like music labels, there will be some pushback by VAM and the payment card processors as Apple upsurps their space.

 

Apple doesn't need all that profit from the transactions... what they do need is confidence that every 2-4 years, you spend $800 on their mobile computing equipment.   Making $100 a year on your transactions (1% of $10,000 in annual purchase [<50 dollars a day]... times say 500M users= 50B), is valuable, but not critical gravy.

 

So in the end, this is like iTunes Music.   I'll crack a small smile if they say, 'we're just trying to run a break even business to make sure our customers have the best experience using our devices.'   

post #20 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

Visa/Amex/Mastercard/Discover have total revenues of $60B a year
They have total profits of almost $20B a year
You dont think Apple can take a huge chunk of that?


Keep in mind the time Paypal has been in business and the spread they have. Apple won't have that when this launches. 

 

Rather like how Google Maps was crap when it started like 10 years ago, Paypal was barely making any money when it started. It wasn't until various web sites, including Apple, jumped on board the 'pay with Paypal' system and eBay bought Paypal that they really started to rake in the cash.  

 

That is the same thing that is likely to happen here. Apple starts small with credit card only via one or more of the biggies. Everyone sees that it's no ore risky than using a plastic card (from customer and merchant point of view) and companies like Gap etc want to add their cards, banks are willing to allow debit transactions, online sites want to hook up for auto fill and validate with touch id etc. Even bill pay services might get it on it. And here comes enough money to sustain it at the least. But more important is that folks will want the hardware. On the fence upgraders will be lured to get rid of that iPhone 4 or 4S or that iPad 2 and so on. And that is where Apple makes the real profit

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post #21 of 71
Quote:
Originally Posted by sog35 View Post
 

Apple already has 900,000,000 creditcard accounts.

 

Imagine if Apple releases a digital Credit card with Apple rewards.  The sign up would be off the charts.  Get 1% of your purchases to use on iTunes or Apple retail?  Awesome.


Now that would be really killer. Actually they kind of did do that at one point. Barcley Bank which handles their inhouse financing had a choice of a no interest introductory offer or a rewards card. I rather wish I had known that when it was live cause I would have applied and just route everything through it for max tunes points. 

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post #22 of 71
Quote:
Originally Posted by Rogifan View Post


This is why the stock was down 4% earlier this week. Wall Street clowns pumped up the stock to record highs and then dump it saying nothing Apple does can be meaningful to the top/bottom line. I wouldn't trust any of these clowns to know what Apple might/is do(ing). They think small, Apple doesn't.

 

Actually the stock was down because of the vast number of negatively slanted articles that have been coming out over the past couple of weeks, especially after the invite. It's standard form. Hype the stock all summer to raise the stock. The invite goes out and the talk of delays and issues goes up to drive the stock down. Big houses score on the dump, then can get more shares cheap when everyone is excited about what is announced and then even more so when the lines are huge, preorders are gangbusters and so on. 

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post #23 of 71
Quote:
Originally Posted by waldobushman View Post

I don't expect a payment system around the iPhone will have much impact generally, though Apple might make some money. There is a big security problem in the US regarding debit and credit cards, and an iPhone solution will not even be a blip. Sure many people carry smart phones and a transaction using an iPhone with TouchID might be useful, but as for having an impact on CC security -- nothing.

The US is going to have to change how all transactions are handled. Unless Apple is also coming out with replacement credit and debit card technology, Apple's impact will be minimal.

I think the 'smart endpoint' will be a fundamental shift in how credit accounts are handled.  The physical card is silly, and the intermediate PoS devices are suspect too.  Building an end to end solution where each party (buyer, seller, bank) only know what they need to know solves the fundamental issue of too much data passed

 

I buy a coffee

PoS device says "$4.28 plus what ever tip you want"

I tap my phone, it receives 'Seller XXXX [an encrypted token for their bank account encrypted by their bank's public key and retailers private key] wants 4.28 (4.00+tax)... do you want to pay and how much?"

I click add 15% to subtotal  and 'purchase' with my touch ID

   which unlocks my account number, which I then encrypt in my private key

Phone sends my bank "Pay Seller XXXX $4.68" encrypted in my banks [or apple's] public key

 

     (all of this is tokenized, checksummed, serialized and tokenized

      that the worst thing that can happen is replay of exactly the same

      transaction being rejected due to serialization issues)

 

Transaction goes to PoS device (can't read it), off to the internet to Apple/myBank

My Bank decrypts it, and decrypts my account with my public key

verifies my limits and (if denied, sends a note back to ME saying "sorry, can't pay them")

sends retailers bank (or proxy) a verifiction [do you know retailer XXXX?] [again encrypted in bank to bank PKI

They say yes, bank queues up a transfer and sends me [my public key, bank's private key[ and the Retailer[in retailers public key,] Approved.

Transactions clear on my device and PoS

- Starbucks never knows who I am or what my account is... they just know my bank told their bank 'you'll get the money'

     'Loyalty' cards, may obviate that... I know 'who you are' but that's separate from the PAN information from your Credit Account

- Banks don't know  the other bank's client's accounts perse, just that real time, each can say, what you sent me was valid.

 

I drink expensive dirty water, and the barista may get their .60 at the end of their shift.

 

Even online/offline purchases work for this, by my phone and my bank generating 1 time transaction accounts that are pre-authed for only that transaction amount and that seller at that particular time.

 

Getting rid of the physical, human readable card is a big deal.   Tokenizing the transaction beginning at the Seller and not the PoS device (it's all in the clear in RAM before tokenization... right Target?)

 

This gets to the crux of information security.... It's not the computers, the networks, or the people... 'it's the DATA, stupid!'  The earlier in the transaction you can secure the 'secret'  (account number... all the rest is purely authentication data... exp date, name, phone , zip code, CVV CVV2).   Using this sort of model, Other than the endpoint setup (where risk of intercept is greatest), your account number should never be known by anyone other than you and your bank.)  Then it's just 'authorizing' (who is allowed to use this data), and that's where TouchID (and account setup) narrows it down as well (only these devices, and persons who are registered to use the secure enclave verified by biometrics on those devices are allowed to transact with this account).

 

The obvious risk is covert takeover of the endpoint.   That's where Apple's risk is, and why, I think, you'll never see a 'multi-user' iOS device.

post #24 of 71
Quote:
Originally Posted by AppleInsider View Post

Finally, he said Apple could become a full-fledged credit card issuer, which offers the most attractive economics. In Hall's estimates, this approach could add about 11 percent to his 2015 earnings per share forecast, but he also views this as the least likely method for Apple to take.

In this method, Apple could either become a bank, or find a bank partner to co-brand with. Both methods would open the company up to regulation.

What's to prevent Apple from setting up a separate company as a bank/credit card provider?

Maybe iBank 1biggrin.gif

The separate, wholly-owned company would be subject to regulation -- but not Apple, Inc.

Same way Apple could establish an MVNO as a separate, wholly-owned company.
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post #25 of 71
Quote:
Originally Posted by herbapou View Post
 

I work on the ATM and VISA systems for a Canadian bank and let me tell you Apple will collect way more than 1 cent per transactions. Let me give you some examples:

 

Credit card fees:  There is no fee on the card owner side but there is a % of the purchased amount on the merchant side. The merchant side fees can get pretty high.

 

 

Apple only gets what they negotiated. So yes those fees from the merchant might be high but Apple can only get a piece of that from the processors. 

 

keep in mind that they are only talking about right now. As in to get folks to sign up for the program. So perhaps Apple did lowball, for say the first year or two, to get someone to be willing to jump into the risk. Then after that time the amount goes way up. 

 

Its not unlike an actor that could demand $10 million for a movie agreeing to do it for $1 million because they really really love the project and want to do it even though it seems totally against their type. 

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post #26 of 71
Quote:
Originally Posted by Johnny Mozzarella View Post


In order to do these digital payments you will need an iOS device with NFC.
 


or they need a scanner that can read a barcode or QR code. That's how Starbucks already does it via Passbook. No NFC required. 

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post #27 of 71
Quote:
Originally Posted by sog35 View Post

This clown has no idea what Apple will do with payments in the future. If Paypal can net billions of dollars a year with only 100 million accounts imagine how much Apple can with 800 million accounts.

PayPay is estimated to have $3B in net revenue for 2014 and $1.8B in Gross profit.

Apple can easily multiply that by 6x that amount once the payment system is mature.
We are talking $18B in revenue and $8B in profit. That's more profit than what the iPad produces.

Visa/Amex/Mastercard/Discover have total revenues of $60B a year
They have total profits of almost $20B a year
You dont think Apple can take a huge chunk of that?

I'm not understanding using PayPal as an comparative example. Is Apple convincing financial institutions that it's safer and therefore getting them to agree to lower fees which in turn will get retailers to support NFC in any way the same business that PayPal is in? If so, can you explain it to me because I'm not seeing it.

What I see is Apple wanting to do what they've done with other services that support the sale of their devices, which means they benefit better by not trying to sell two razor handles.

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post #28 of 71
Quote:
Originally Posted by Dick Applebaum View Post


What's to prevent Apple from setting up a separate company as a bank/credit card provider?
 

how about a ton of regulations, taxes etc. Same as not becoming a cell phone service, an ISP, a cable company etc. 

 

Apple has shown time and again they don't want to be everything to everyone. They aren't Google in that sense. 

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post #29 of 71
Quote:
Originally Posted by SolipsismX View Post

Is Apple convincing financial institutions that it's safer and therefore getting them to agree to lower fees which in turn will get retailers to support NFC in any way the same business that PayPal is in? If so, can you explain it to me because I'm not seeing it.
 


No one really can explain it because it's not fact from Apple yet. 

 

BUT my read of the talk is that Apple is trying to set up digital credit cards. Look at the examples of what they have already set up via PassBook. Things like Starbucks having a QR code for your rewards account which can be tied to an existing gift card and even reloaded right from the app without need for the actual card at any time. Or Apple's own in store gift cards working the same way with a bar code. Even this 'pay at the store into your iTunes' is a similar scheme running the other direction. 

 

The idea seems to be that you could have a digital copy of your card in your phone so you don't need the actual one. You flash a QR/barcode or perhaps NFC if that ever happens and that is the 'swipe' of your card. 

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post #30 of 71
Quote:
Originally Posted by Dick Applebaum View Post

What's to prevent Apple from setting up a separate company as a bank/credit card provider?

Maybe iBank 1biggrin.gif

The separate, wholly-owned company would be subject to regulation -- but not Apple, Inc.

Same way Apple could establish an MVNO as a separate, wholly-owned company.

Highly improbable due to too much regulation, but if there is an iBank I would totally move all my money there ASAP.

Same with an Apple MVNO. Unlikely, but one can dream, eh?
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 The iPhone is the best, but HTC's One (M8) or the Moto X are okay too I guess.
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 The iPhone is the best, but HTC's One (M8) or the Moto X are okay too I guess.
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post #31 of 71
Quote:
Originally Posted by charlituna View Post
 

how about a ton of regulations, taxes etc. Same as not becoming a cell phone service, an ISP, a cable company etc. 

 

Apple has shown time and again they don't want to be everything to everyone. They aren't Google in that sense. 

I dunno.   There a billions in offshore money that could be used to fund an Apple Bank in regions that are not hotly contested (regulations = political lobbying).   Earning 3.0% [assuming 16% margins on a 17.99% interest rate] on that money may be worthwhile.

 

They are your record company

Your backups company (well, that may not be working out well at the moment).

your email company

your app store

your photo developer 

your Sapphire mining company ;-)

 

Minimally, I see them as being your (and many retailers) payment processor.  Retailers want it because they want lower risk [lower costs], and Apple cutting out the middle men [who will want to maximize profits, because that's all they do... apple wants to maximize user experience] is what they do well.  

 

Visa/AMEX/MC may own the brand, but the final mile for iOS users  may soon be owned by Apple or a subsidiary.  

post #32 of 71

It will be interesting to see what Apple does with this. However, those who are pointing at the profits that CC companies and Banks are making on people using a CC has to remember most of that revenue and profits is coming from the interest most people pay since they do not pay off their cards each month. Banks are not going to share these profits with Apple. The most that Apple will get with be some small percent of the transacted amount less the transaction fee the CC company charge.

 

I think the analysis is probable pretty close on this one. It will be years before Apple will even report significant profits to their bottom line.

post #33 of 71
Quote:
Originally Posted by Johnny Mozzarella View Post

Quote:
Originally Posted by Suddenly Newton View Post

What lock in?

In order to do these digital payments you will need an iOS device with NFC.
if you already have an iPhone then all you need is the iWatch.
If you don't have an iPhone, then you need to buy the iPhone 6 with NFC.

IWatch will not work with Android, it is all about selling more iOS devices.
Apple's goal is to keep adding to the iOS value proposition to justify the higher price.
Many Android users will switch to the iPhone so they can also use the iWatch for payments, health tracking and security.

Apple's competitors have NFC payment systems but they have not caught on because they only understand how to add features.
They don't understand how to create end to end seamless experiences that delight consumers.

My friend was recently telling me how he can't wait to switch back to an iPhone after switching to an HTC one.
He said it was a good device but there were constant little annoyances that made him miss his iPhone.


Even more than NFC, the iPhone 5S and, likely, every new iDevice will have TouchID.

The cc providers could benefit from at least one higher tier of security with a TouchID Apple device:
  1. TouchID secured -- one-time, single-vendor-targeted, time-limited token exchange between an iDevice and and the vender terminal/backend processor
  2. TouchID secured ad hoc cc data exchange between an iDevice and and the vender terminal/backend processor

Both of the above, are more secure than a card present swipe or NFC transfer.


As been suggested, Apple could sweeten the pot by offering to indemnify the cc providers for any losses using TouchID.

Additionally, the cc providers, vendors and Apple could sweeten the pot for consumers by offering cashback reward incentives to customers who purchase using a TouchID secured transaction.


Those look like pretty big lockins for cc providers, vendors and consumers.
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post #34 of 71
Quote:
Originally Posted by charlituna View Post
 


No one really can explain it because it's not fact from Apple yet. 

 

BUT my read of the talk is that Apple is trying to set up digital credit cards. Look at the examples of what they have already set up via PassBook. Things like Starbucks having a QR code for your rewards account which can be tied to an existing gift card and even reloaded right from the app without need for the actual card at any time. Or Apple's own in store gift cards working the same way with a bar code. Even this 'pay at the store into your iTunes' is a similar scheme running the other direction. 

 

The idea seems to be that you could have a digital copy of your card in your phone so you don't need the actual one. You flash a QR/barcode or perhaps NFC if that ever happens and that is the 'swipe' of your card. 

 

I saw WSJ saying that Apple convinced VAM that apple device stored credit cards will be 'card present' transactions.  That's lower risk (something you have), and therefore a lower transaction rate.   I think the key thing is that Apple must validate the name of the phone owner against the name of the cardholder (e.g. a previous valid transaction with that card as registered against your AppleID).

 

QR/Barcode is just a bit better than using your card, Better still would be a 1 Time CC number, that either Apple or my bank approve as valid.

post #35 of 71
Quote:
Originally Posted by TheOtherGeoff View Post

Quote:
Originally Posted by waldobushman View Post

I don't expect a payment system around the iPhone will have much impact generally, though Apple might make some money. There is a big security problem in the US regarding debit and credit cards, and an iPhone solution will not even be a blip. Sure many people carry smart phones and a transaction using an iPhone with TouchID might be useful, but as for having an impact on CC security -- nothing.


The US is going to have to change how all transactions are handled. Unless Apple is also coming out with replacement credit and debit card technology, Apple's impact will be minimal.
I think the 'smart endpoint' will be a fundamental shift in how credit accounts are handled.  The physical card is silly, and the intermediate PoS devices are suspect too.  Building an end to end solution where each party (buyer, seller, bank) only know what they need to know solves the fundamental issue of too much data passed

I buy a coffee
PoS device says "$4.28 plus what ever tip you want"
I tap my phone, it receives 'Seller XXXX [an encrypted token for their bank account encrypted by their bank's public key and retailers private key] wants 4.28 (4.00+tax)... do you want to pay and how much?"
I click add 15% to subtotal  and 'purchase' with my touch ID
   which unlocks my account number, which I then encrypt in my private key
Phone sends my bank "Pay Seller XXXX $4.68" encrypted in my banks [or apple's] public key

     (all of this is tokenized, checksummed, serialized and tokenized
      that the worst thing that can happen is replay of exactly the same
      transaction being rejected due to serialization issues)

Transaction goes to PoS device (can't read it), off to the internet to Apple/myBank
My Bank decrypts it, and decrypts my account with my public key
verifies my limits and (if denied, sends a note back to ME saying "sorry, can't pay them")
sends retailers bank (or proxy) a verifiction [do you know retailer XXXX?] [again encrypted in bank to bank PKI
They say yes, bank queues up a transfer and sends me [my public key, bank's private key[ and the Retailer[in retailers public key,] Approved.
Transactions clear on my device and PoS
- Starbucks never knows who I am or what my account is... they just know my bank told their bank 'you'll get the money'
     'Loyalty' cards, may obviate that... I know 'who you are' but that's separate from the PAN information from your Credit Account
- Banks don't know  the other bank's client's accounts perse, just that real time, each can say, what you sent me was valid.

I drink expensive dirty water, and the barista may get their .60 at the end of their shift.

Even online/offline purchases work for this, by my phone and my bank generating 1 time transaction accounts that are pre-authed for only that transaction amount and that seller at that particular time.

Getting rid of the physical, human readable card is a big deal.   Tokenizing the transaction beginning at the Seller and not the PoS device (it's all in the clear in RAM before tokenization... right Target?)

This gets to the crux of information security.... It's not the computers, the networks, or the people... 'it's the DATA, stupid!'  The earlier in the transaction you can secure the 'secret'  (account number... all the rest is purely authentication data... exp date, name, phone , zip code, CVV CVV2).   Using this sort of model, Other than the endpoint setup (where risk of intercept is greatest), your account number should never be known by anyone other than you and your bank.)  Then it's just 'authorizing' (who is allowed to use this data), and that's where TouchID (and account setup) narrows it down as well (only these devices, and persons who are registered to use the secure enclave verified by biometrics on those devices are allowed to transact with this account).

The obvious risk is covert takeover of the endpoint.   That's where Apple's risk is, and why, I think, you'll never see a 'multi-user' iOS device.

^^^ Oye, oye, oye!

That's why Apple calls them iPhones and iPads -- not wePhones and wePads!
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post #36 of 71
Quote:
Originally Posted by TheOtherGeoff View Post

...which unlocks my account number, which I then encrypt in my private key...

They don't even need to use your actual account number, but an isolated one that is specific to that device so if you wipe that device that per-device account number also becomes defunct, much in the same way a debit card account number is tied your your checking account but does not have your actual checking account number on it.

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post #37 of 71
I figured it out! Apple isn't going to offer NFC or even payments via the iPhone but instead do it all via the iWatch. What you do is take the the edge of the band of your iWatch and slide it through the credit card reader. Retailers don't have to change anything! Your watch band end has a magnetic strip. Couldn't be easier¡

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post #38 of 71
Imagine when you are shopping in a store, with the help of iBeacon your iPhone can show notifications of items or shops that are on sales or having joint promotion discount with some specific credit cards in your iWallet.
This kind of "discovery" feature together with a secure (by Touch ID) & convenient (by NFC / iBeacon / passbook) way of making payment is the great asset for Apple to persuade the banks to offer their virtual cards in iWallet and reimburse certain percentage of their transaction income to Apple.
post #39 of 71
Quote:
Originally Posted by SolipsismX View Post

I figured it out! Apple isn't going to offer NFC or even payments via the iPhone but instead do it all via the iWatch. What you do is take the the edge of the band of your iWatch and slide it through the credit card reader. Retailers don't have to change anything! Your watch band end has a magnetic strip. Couldn't be easier¡

Here's a picture of the new iWatch:




... 'Splain to me just how that would work 1confused.gif
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post #40 of 71
Quote:
Originally Posted by Johnny Mozzarella View Post

In order to do these digital payments you will need an iOS device with NFC.
if you already have an iPhone then all you need is the iWatch.
If you don't have an iPhone, then you need to buy the iPhone 6 with NFC.

IWatch will not work with Android, it is all about selling more iOS devices.
Apple's goal is to keep adding to the iOS value proposition to justify the higher price.
Many Android users will switch to the iPhone so they can also use the iWatch for payments, health tracking and security.

Apple's competitors have NFC payment systems but they have not caught on because they only understand how to add features.
They don't understand how to create end to end seamless experiences that delight consumers.

My friend was recently telling me how he can't wait to switch back to an iPhone after switching to an HTC one.
He said it was a good device but there were constant little annoyances that made him miss his iPhone.

I'm still not sure about what regarding this rumored payment processing system equates to lock in, but I understand what you meant about iOS lock in.

Apple's just rumored to provide a credit card proxy. It's not a credit issuer, nor a bank. And issuers can (and probably will) still send you a physical credit card, not that it's any more secure, not in the US anyway. But nothing about that locks you in to Apple "iWallet" (or whatever) any more than anything about Amazon Prime locking you into Amazon. There's maybe a convenience or economic incentive to stay, but nothing to prevent you from leaving.

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