Apple Pay dominates discussion at Money20/20 mobile payments industry conference

Posted:
in iPhone edited November 2014
This week was the Money20/20 mobile payment conference in Las Vegas, Nev., and with over 7,000 people in attendance, the hottest topic at the show was the recent launch of Apple Pay and what it means for the industry.



J.P. Morgan analyst Tien-tsin Huang was in attendance at Money20/20, and provided a summary of the event in a note to investors on Thursday, a copy of which was provided to AppleInsider. At the conference, attendees were abuzz about Apple Pay, the recently launched mobile payment service from Apple available on the iPhone 6 and iPhone 6 Plus.

In particular, industry insiders view how Apple partnered closely with existing banks and credit card providers as a model for others to follow. Payment industry insiders view Apple Pay as a true "disruptor" that could have long-term ramifications for near-field communication-based payment terminals, and transactions in general.

Huang learned that Apple will bill and audit participating card issuers via the card networks, which serves to show how integral Visa and MasterCard are in the Apple Pay system.

Visa made it a point to highlight Apple Pay in a presentation by company vice president Ryan McInerney, who said that Apple's system is helping to reinvent the credit card number to work in the digital world. Specifically, he said the tokenization standard being pushed by Apple Pay will enhance security and improve transactions.

American Express Chief Executive Ken Chenault also said his company is excited about Apple Pay, noting that AmEx aims to be where its customers want to be, and consumers are excited about Apple's mobile payment service.

One card issuer that doesn't yet support Apple Pay is Discover, and its CEO David Nelms is taking a more cautious approach, saying at Money20/20 that adoption of Apple's service will take time. Nelms doesn't see a "world without plastic" traditional credit cards for at least a decade.



Overall, the industry has shown a "nervous enthusiasm" for Apple Pay, according to Huang. He said insiders believe Apple has the best opportunity to drive mobile payment adoption given its history of focusing on consumer experience, as well as its willingness to collaborate with banks and card providers.

"However, we heard healthy debate on how steep the adoption curve will be in the physical world (many were more bullish on Apple Pay's prospects for in-app purchases), given low merchant acceptance, and how bank friendly future iterations of Apple Pay might be as it gains scale," Huang said.

Still, payment industry members expect NFC chips will begin to spread more quickly with the upcoming switch to secure EMV cards in the U.S. The so-called "chip-and-signature" switch will be accompanied by new terminals at merchants, and payment industry experts expect that many merchants will opt for NFC-capable terminals when they upgrade.

"Many are watching how consumers embrace Apple Pay with limited merchant acceptance, understanding that merchant adoption of NFC will require consumers to demand it," Huang said.
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Comments

  • Reply 1 of 42

    And CurrentC was sitting in the corner comparing themselves to the iPhone.

  • Reply 2 of 42

    Another dent in the universe. 

  • Reply 3 of 42
    If this is how Discover does business, I known why I never hear about them anymore.
  • Reply 4 of 42
    [quote name="AppleInsider" url="/t/183283/apple-pay-dominates-discussion-at-money20-20-mobile-payments-industry-conference#post_2635749"]This week was the Money20/20 mobile payment conference in Las Vegas, Nev., and with over 7,000 people in attendance, the hottest topic at the show was the recent launch of Apple Pay and what it means for the industry.[/QUOTE]

    I'm guessing it's the highest antecedence they've ever had, not to mention Money20/20 is now something more than 7,000 people have ever heard of. I wonder who is indirectly responsible for all of that?

    [QUOTE]In particular, industry insiders view how Apple partnered closely with existing banks and credit card providers as a model for others to follow. [/QUOTE]

    1) Apple can't stop others from doing the same thing, save for any exclusivity agreements with the financial institutions and multinationals, but I have a feeling Apple under Cook wouldn't do that for [I]this[/I] service.

    2) Historically, the areas are pinnacle to Apple's success are the things their competitors don't care about copying (i.e.: customer service and user experience), but I hope they copy this service because we're all better off with more places accepting NFC so we all forego physical cards as soon as possible.

    [QUOTE]Payment industry insiders view Apple Pay as a true "disruptor" that could have long-term ramifications for near-field communication-based payment terminals, and transactions in general.[/QUOTE]

    Long-term, yes, but the customer and banks will benefit. Only MCX and thieves (oops, I said thieves twice¡) see ?Pay as a problem.

    [QUOTE]One card issuer that doesn't yet support Apple Pay is Discover, and its CEO David Nelms is taking a more cautious approach, saying at Money20/20 that adoption of Apple's service will take time.[/QUOTE]

    I think his outlook is so myopic that he should only be allowed to be at conference called Money 20/200, but if Discover waits a year it's not going to hurt them or ?Pay.

    [QUOTE]Nelms doesn't see a "world without plastic" traditional credit cards for at least a decade.[/QUOTE]

    Not with that attitude!

    [QUOTE]Overall, the industry has shown a "nervous enthusiasm" for Apple Pay, according to Huang. He said insiders believe Apple has the best opportunity to drive mobile payment adoption given its history of focusing on consumer experience, as well as its willingness to collaborate with banks and card providers.[/QUOTE]

    That's understandable considering how many failed attempts there have been, all of which were trumpeted. I saw every single one of those as flawed, described how I think a mobile payments solution should work, and that's what Apple implemented, but that's me. I think by next year there will be very few people that still can't see how an ?Pay-like solution is the future.

    [QUOTE]"However, we heard healthy debate on how steep the adoption curve will be in the physical world (many were more bullish on Apple Pay's prospects for in-app purchases), given low merchant acceptance, and how bank friendly future iterations of Apple Pay might be as it gains scale," Huang said.[/QUOTE]

    A learning curve is a 2D graph that uses time × experience or experience × learning to indicate the time one gets to a plateau or particular level. The more steep the curve the sooner it arrives. This is not the same as a steep hill which would be more difficult to ascend than a gentle hill.

    In this case, a steep adoption means adoption on the y-axis and time on the x-axis. With adoption being steep he's inadvertently stating adoption will be quickly. I agree.


    PS: One thing I didn't expect to be good for ?Pay was the drive-thru. They have to bring the NFC-capable card swipe machine out of the window, but if my wallet is in my pocket and my phone is still on the console it's much easier to grab my phone.
  • Reply 5 of 42
    solipsismy wrote: »

    PS: One thing I didn't expect to be good for ?Pay was the drive-thru. They have to bring the NFC-capable card swipe machine out of the window, but if my wallet is in my pocket and my phone is still on the console it's much easier to grab my phone.

    I thought McDonald's was going to start making drive thru NFC easier, but haven't heard anything yet.
  • Reply 6 of 42
    I thought McDonald's was going to start making drive thru NFC easier, but haven't heard anything yet.

    Unless they make it wireless it's already easy, in my experience. They just pick it up and pass out the window like they're handing you food and you put your phone up to it. It's definitely faster than handing them your card to swipe, not to mention more safe since on many levels, especially since they can't secretly copy your card's magnetic strip out of view.
  • Reply 7 of 42
    solipsismy wrote: »
    Unless they make it wireless it's already easy, in my experience. They just pick it up and pass out the window like they're handing you food and you put your phone up to it.

    They really need a permanent, solid piece of hardware built into their menu ordering system or at the window of their "drive-thru".

    By the way, at your local McDonald's do they have an actual employee stand outside to take lunch orders with a wireless order pad? This is something they've been doing in my area.
  • Reply 8 of 42

    People keep missing the "auditing" portion.

     

    Further proof Apple has no idea what you buy since they can't come up with the numbers themselves (to get their 0.15% cut). Hence the agreements to allow audits of the CC companies numbers to make sure everything is on the up and up.

  • Reply 9 of 42
    People keep missing the "auditing" portion.

    Further proof Apple has no idea what you buy since they can't come up with the numbers themselves (to get their 0.15% cut). Hence the agreements to allow audits of the CC companies numbers to make sure everything is on the up and up.

    The credit card integration is a stealthy bit of judo on Apple's part. They will eventually disintermediate the CC companies entirely.
  • Reply 10 of 42
    They really need a permanent, solid piece of hardware built into their menu ordering system or at the window of their "drive-thru".

    By the way, at your local McDonald's do they have an actual employee stand outside to take lunch orders with a wireless order pad? This is something they've been doing in my area.

    I imagine it's used for more busy locations. I know that's common with In-N-Out Burger, although I can't recall if they also take your card. It might just be so they can start your order much further back from the regular order taker/

    People keep missing the "auditing" portion.

    Further proof Apple has no idea what you buy since they can't come up with the numbers themselves (to get their 0.15% cut). Hence the agreements to allow audits of the CC companies numbers to make sure everything is on the up and up.

    I imagine they have the multinationals report what the banks owe them, but there is probably some trust going on since they all could collude to keep Apple's profits down. Although I don't think Apple either expects that nor really cares as this is a drop in the market for them.

    The credit card integration is a stealthy bit of judo on Apple's part. They will eventually disintermediate the CC companies entirely.

    I don't see that ever happening, at least not because of Apple's direct influence.
  • Reply 11 of 42
    Quote:

    One card issuer that doesn't yet support Apple Pay is Discover, and its CEO David Nelms is taking a more cautious approach, saying at Money20/20 that adoption of Apple's service will take time. Nelms doesn't see a "world without plastic" traditional credit cards for at least a decade.

     

    And...

    Kodak did not saw a world without print photography...

    Blackberry did not saw a world with keyless phones...

     

     

    So we already know where that road leads to.

  • Reply 12 of 42
    gatorguygatorguy Posts: 20,261member
    People keep missing the "auditing" portion.

    Further proof Apple has no idea what you buy since they can't come up with the numbers themselves (to get their 0.15% cut). Hence the agreements to allow audits of the CC companies numbers to make sure everything is on the up and up.

    Of course Apple would not know what you buy, at least not as it now stands.

    Those retailers with iBeacons, iOS apps, and Apple Pay will probably be able to link a name and profile with your meanderings, targeted ads and actual purchases but that's not Apple directly. Note tho that there's been rumors of Apple rolling out a rewards program for using Apple Pay. If that becomes a reality I'm not sure Apple would still not be tracking you and your purchases. So far of course that's only a rumor and may never ship.
  • Reply 13 of 42
    gatorguy wrote: »
    Of course Apple would not know what you buy, at least not as it now stands.

    I doubt that will ever change.
    Those retailers with iBeacons, iOS apps, and Apple Pay will probably be able to link a name and profile with your meanderings, targeted ads and actual purchases but that's not Apple directly.

    Retailers could be hard at work to create algorithms to tie all those in but there is an easier way to do all this and have the customer beg for it: reward cards. I gladly had my CVS card over because of some reward bucks I get at the end of the year. We're talking maybe $20 a year so probably less than a quarter of a penny, but I'd shop there anyway and not use cash so they have all my info regardless. Plus, the reward cards also offer coupons that eerily know what you want before you want it.
    Note tho that there's been rumors of Apple rolling out a rewards program for using Apple Pay.

    I think that was just a lot of speculation as to how Apple might make ?Pay work.
    If that becomes a reality I'm not sure Apple would still not be tracking you and your purchases. So far of course that's only a rumor and may never ship.

    Since they aren't an intermediary for the purchase their audits would have to contain very specific user data for them to create a rewards program. I don't see that happening. They make more money by not dealing with that.
  • Reply 14 of 42
    jhromeror wrote: »
    So we already know where that road leads to.


    [VIDEO]
  • Reply 15 of 42
    rob53rob53 Posts: 2,007member

    "However, we heard healthy debate on how steep the adoption curve will be in the physical world (many were more bullish on Apple Pay's prospects for in-app purchases), given low merchant acceptance, and how bank friendly future iterations of Apple Pay might be as it gains scale," Huang said.

     

    Were their any Canadians or European people in attendance? I thought NFC is already something they all use. I guess it's just the mindless American "Money" people who are back in the 15th century.

  • Reply 16 of 42
    robmrobm Posts: 1,068member
    gatorguy wrote: »
    Note tho that there's been rumors of Apple rolling out a rewards program for using Apple Pay.

    Nah - that has to be BS.
    Can't see it - not Apples style and do they need to ?
    Nah, BS.
  • Reply 17 of 42
    misamisa Posts: 827member
    solipsismy wrote: »
    I'm guessing it's the highest antecedence they've ever had, not to mention Money20/20 is now something more than 7,000 people have ever heard of. I wonder who is indirectly responsible for all of that?
    1) Apple can't stop others from doing the same thing, save for any exclusivity agreements with the financial institutions and multinationals, but I have a feeling Apple under Cook wouldn't do that for this service.

    Well, considering that it's part of the EMV, it's not an apple-exclusive technology. Just the "Apple Pay" marks, and the way Apple implements the secure element is Apple's bit.

    The Banks, in wanting to do their own Apps want to do HCE (Host Card Emulation), hence storing stuff in the Cloud (Like CurrentC), and of course the weakness with HCE and Cloud's is that it puts the weakness pack into the user's cloud credentials (eg a username and password) not a biometric.

    Which also means it's useless in areas without cellular service. Though I might ask why someone would own a cell phone with no service.

    solipsismy wrote:
    2) Historically, the areas are pinnacle to Apple's success are the things their competitors don't care about copying (i.e.: customer service and user experience), but I hope they copy this service because we're all better off with more places accepting NFC so we all forego physical cards as soon as possible.
    Long-term, yes, but the customer and banks will benefit. Only MCX and thieves (oops, I said thieves twice¡) see ?Pay as a problem.
    I think his outlook is so myopic that he should only be allowed to be at conference called Money 20/200, but if Discover waits a year it's not going to hurt them or ?Pay.
    Not with that attitude!
    That's understandable considering how many failed attempts there have been, all of which were trumpeted. I saw every single one of those as flawed, described how I think a mobile payments solution should work, and that's what Apple implemented, but that's me. I think by next year there will be very few people that still can't see how an ?Pay-like solution is the future.
    A learning curve is a 2D graph that uses time × experience or experience × learning to indicate the time one gets to a plateau or particular level. The more steep the curve the sooner it arrives. This is not the same as a steep hill which would be more difficult to ascend than a gentle hill.

    In this case, a steep adoption means adoption on the y-axis and time on the x-axis. With adoption being steep he's inadvertently stating adoption will be quickly. I agree.


    PS: One thing I didn't expect to be good for ?Pay was the drive-thru. They have to bring the NFC-capable card swipe machine out of the window, but if my wallet is in my pocket and my phone is still on the console it's much easier to grab my phone.

    In Canada, the pin-pad part of the POS also contains the chip card reader and NFC reader. But the problem with this is still slows the drive thru while the POS authorizes, though it's faster and safer than handing your card to someone.

    As for AMEX and Discover, they technically already support EMV, they just aren't accepted outside of the US as frequently (or at all, in the case of Discover.)
  • Reply 18 of 42
    Quote:

    Originally Posted by RobM View Post





    Nah - that has to be BS.

    Can't see it - not Apples style and do they need to ?

    Nah, BS.

     

    I can see reward cards from merchants work the same as the credit cards:

     

    You use the iPhone camera to capture the reward card, You can activate the cards while you use Apple Pay.

  • Reply 19 of 42
    If this is how Discover does business, I known why I never hear about them anymore.

    They see a world without plastic being "a decade away." This reminds me of Intel in the mid 1990s, who was pushing the Itanium as their only 64-bit chip and arguing that 64-bit desktops were still a good decade away. Then AMD shipped the first Athlon 64 and this competitive pressure ushered in the age of the 64-bit x86 desktop much, much sooner. Intel was forced to adopt AMD's 64-bit extensions to x86 to stay compatible: something that was up til then unthinkable. The 64-bit x86 chip ended up eating Itanium's lunch in the data center.

    I see something similar happening to Discover. When disruption comes to your languid industry, you'd better get on the right side of it. Or risk becoming the next Nokia or Palm.
  • Reply 20 of 42
    misa wrote: »
    Well, considering that it's part of the EMV, it's not an apple-exclusive technology. Just the "Apple Pay" marks, and the way Apple implements the secure element is Apple's bit.

    The Banks, in wanting to do their own Apps want to do HCE (Host Card Emulation), hence storing stuff in the Cloud (Like CurrentC), and of course the weakness with HCE and Cloud's is that it puts the weakness pack into the user's cloud credentials (eg a username and password) not a biometric.

    Which also means it's useless in areas without cellular service. Though I might ask why someone would own a cell phone with no service.

    1) You lost me. What is like EMV and are you saying ?Pay is useless without a cellular connection from your phone?

    2) There are dead zones, often in stores. Sometimes you see bars and service but interference keeps data from working properly even though you can oft make/recieve a call.

    They see a world without plastic being "a decade away."

    I read it as they see mobile payments not taking hold for a decade. If they mean that plastic will all but disappear in a decade then I think that would be a remarkably fast change considering people still use cash and checks.
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