apple pay could finally ignite the tap-and-pay !1 november 20, 2014 fbic global publication: apple...

Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay
Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay
Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay
Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay
Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay
Download Apple Pay Could Finally Ignite the Tap-and-Pay !1 November 20, 2014 FBIC Global publication: apple pay

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    November 20, 2014

    FBIC Global publication: apple pay could finally ignite the tap-and-pay revolution

    Apple Pay Could Finally Ignite the Tap-and-Pay Revolution

     

    D E B O R A H W E I N S W I G E x e c u t i v e D i r e c t o r – H e a d G l o b a l R e t a i l R e s e a r c h a n d I n t e l l i g e n c e F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m N e w Y o r k : 6 4 6 . 8 3 9 . 7 0 1 7

    November 20, 2014

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    November 20, 2014

    FBIC Global publication: apple pay could finally ignite the tap-and-pay revolution

    Apple Pay Could Finally Ignite the Tap-and-Pay Revolution On   October   20,   Apple   launched   its   Apple   Pay   network   with   great   fanfare   and   typical   bravado—implying  that   it  was  the  pioneer   in  mobile  payments.  That  claim  was   likely  a   big   surprise   to   the   real   e-­‐payment   forerunners:  Google  Wallet,  which  was   launched   in   2011  but  has  not  achieved  commercial  nor  economic  success.  There  are  also  SoftWallet,   a  smartphone  app  that  manages  discount  coupons  and  frequent-­‐customer  information,   and  LoopPay,  which  claims  to  be  the  most  accepted  mobile  wallet  on  the  planet.  Other   countries   have   simple   but   convenient   payment   methods.   For   example,   Hong   Kong   consumers  can  pay  for  transportation  and  small  purchases  with  the  Octopus  RFID  (radio-­‐ frequency   identification)   card,   which   can   be   refilled   at   convenience   stores,   vending   machines,  or  online.  

    Initial  signs  point  to  Apple  Pay  gaining  traction  with  consumers.    There  were  more  than   one  million  activations  within  the  first  72  hours.    Whole  Foods  recorded  150,000  Apple   Pay  transactions  at  384  stores  in  the  first  three  weeks  after  the  launch.    During  the  same   period,  McDonald’s  said  that  more  than  half  of  the  mobile  transactions  at  its  14,000  US   restaurants  were  processed  via  Apply  Pay.    Toys  “R”  Us  said  that  the  number  of  mobile   payments  had  increased  at  its  stores.  

     

     

     

     

     

     

     

     

     

     

     

    The  most  formidable  competitor  to  Apple  Pay  at  present  appears  to  be  CurrentC,  which   was   founded   in   2012   by   the   Merchant   Customer   Exchange   (MCX),   a   consortium   of   retailers,   including  Walmart,  Target,  CVS,  Rite  Aid  and  BestBuy,  and   is  currently   in  pilot   testing  for   launch  in  2015.    CurrentC’s  contract  demands  that  members  reject  all  other   electronic  payment  methods,  and  CVS  and  Rite  Aid  recently  blocked  the  use  of  Apple  Pay   on   their  payment   terminals,  despite  having  compatible  hardware.  A  huge  drawback  of   CurrentC  appears  to  be  usability,  since  making  a  payment  involves  scanning  a  QR  (quick   response)   barcode.   More   important,   CurrentC   does   not   work   with   credit   cards,   but   rather   only  with   prepaid   store   cards   and   debit   cards   tied   to   the   user’s   bank   account.     Interestingly,  the  Target  app  for  iOS  supports  Apple  Pay  while  its  retail  stores  do  not.  

     

     

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    November 20, 2014

    FBIC Global publication: apple pay could finally ignite the tap-and-pay revolution

     

         

    Locations   220,000   110,000  

    Key  Merchants  

    34  including:  Macy’s,   McDonald’s,  Radio  Shack,  Staples   (to  come),  Starbuck’s  (to  come),   Subway,  Whole  Foods,  Texaco,   Walgreens  (not  exclusive)  

    58  including:  7-­‐11,  Best  Buy,   Circle-­‐K,  CVS,  Dunkin’  Donuts,   ExxonMobil,  Kohl’s,  Lowe’s,  Rite   Aid,  Sears,  Target,  Walmart,   Wendy’s  (exclusive)  

    Technology   NFC  chip  +  fingerprint  sensor   QR  codes  

    Ease  of  Use   Tap  and  pay   Scan  a  QR  code  and  enter  a  PIN   code  

    Payment  Method   Credit  and  debit  cards   Checking  accounts  and  merchant   accounts  and  gift  cards  

    Security  Method   Tokenization   Tokenization   Current  Status   In  operation   Pilot  testing  for  2015  launch   Loyalty  Programs   Under  development   Yes  

     

    We  think  that  only  diehard  Apple  fans  will  shun  the  retailers  that  block  Apple  Pay,  since   consumers  can  always  pay  with  cash  and  debit-­‐  and  credit  cards  as  before.  Moreover,   CurrentC’s  management   has   publicly   stated   that   the   current   period   of   exclusivity  will   only   persist   during   the   initial   launch   period.  We   think   retailers   will   want   to   allow   all   major  payment  options,  including  Apple  Pay  if  it  becomes  widely  adopted.  The  payment   industry   was   recently   shaken   by   a   recent   hacking   attempt   on   MCX’s   beta   servers,   however,   the  hackers  only  obtained  e-­‐mail  addresses  and  no  customer   information  or   credit-­‐card  data.  

    What’s  compelling  about  Apple  Pay  is  its  use  of  a  secure  device  number  called  a  token   that   is   stored   in   the   “Secure   Element”   near-­‐field   controller   (NFC)   chip   located   inside   recent-­‐model  iPhones,  iPads,  and  the  upcoming  Apple  Watch.    When  the  user  registers   his  or  her  credit  cards,  a  token  service  provider  provides  Apple  with  a  random  number   to   represent   the  account,  which   is   stored   inside   the   secure   chip.   To   raise   the   security   level  even  further,  the  iDevice’s  fingerprint  sensor  also  verifies  the  user’s  fingerprint  to   authorize   the   transaction.     The   brilliance   of   Apple   Pay   is   in   its   simplicity:   when   the   device  is  within  range  of  a  store’s  NFC  sensor,  up  pops  a  graphic  of  registered  credit  or   debit  cards,  the  consumer  puts  a  finger  on  the  sensor,  and  ding!,  the  payment  has  been   made.  

    Time   and   again,   Apple   has   launched   what   seemed   to   be   a   new   technology   that   was   ultimately  co-­‐opted  and  copied  by  rivals  and  ultimately  became  mainstream.  Such  was   the  case  with  the  user   interfaces  of   its  smartphones  and  tablets.  Apple  Pay  could  very   likely  track  this  same  trajectory.  Where  Apple  leads,  others  are  likely  to  follow.  There  is   even  evidence  that  since  the  launch  of  Apple  Pay,  usage  of  competing  payment  systems   such  as  Google  Wallet  has  increased,  indicating  growing  interest  in  mobile  payments  in   general.    To  that  extent,  it  looks  as  though  tap-­‐and-­‐pay’s  day  has  come.  But  while  Apple   Pay   could   ignite   the   mobile   payment   revolution,   other   companies   may   be   the   main   beneficiary.    

     

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    November 20, 2014

    FBIC Global publication: apple pay could finally ignite the tap-and-pay revolution

     

       APPLE  PAY—PROS