How Apple Pay fooled the world into thinking they solved the Digital Wallet issue
They say timing is everything and Apple is a master at timing.
While Twitter, Blogs, News site, and every other media channel has gone gaga over the new Apple Watch, sadly the real news of the Apple announcement has taken a back seat to a device that, lets be honest, was not a major revelation since it was announced 6 month ago.
The real world-changing news from Apple is Apple Pay
Apple has managed to crack the golden mobile wallet nugget that so many others have tried and failed with the Apple Pay system. This is a system that uses the phone’s NFC (near field communication) technology and a digital wallet to make a payment instead of taking out the credit card to swipe it.
So why is Apple’s system working ?
Apple Pay works not only because Apple has struck a deal with both MasterCard and Visa to accept credit cards and debit cards, but the Apple Pay system works due to impeccable timing that have nothing to do with Apple. The banks in the US have instructed merchants that they need to upgrade their Point of Sale systems to new EMV ones that include NFC. Failure to do so, the merchant will be liable for credit and debit card fraud as the new systems are far more secure than the current now.
According to MasterCard interview on WSJ:
Part of the October 2015 deadline in our roadmap is what’s known as the ‘liability shift.’ Whenever card fraud happens, we need to determine who is liable for the costs. When the liability shift happens, what will change is that if there is an incidence of card fraud, whichever party has the lesser technology will bear the liability.
So if a merchant is still using the old system, they can still run a transaction with a swipe and a signature. But they will be liable for any fraudulent transactions if the customer has a chip card. And the same goes the other way – if the merchant has a new terminal, but the bank hasn’t issued a chip and PIN card to the customer, the bank would be liable.
The key point of a liability shift is not actually to shift liability around the market. It’s to create co-ordination in the market, so you have issuers and merchants investing in the migration at the same time. This way, we’re not shifting fraud around within the system; we’re driving fraud out of the system.
This is critical.
The lack of NFC facility is what stumbled Google Wallet and other such systems. There was nothing wrong with the Digital Wallet Technology, but as NFC was required for its operation and mostly traditional swipe card POS systems were widely available it meant that the wallet could be used in limited outlets and this frustrated customers. However, merchants now HAVE to upgrade their systems which instantly makes Apple Pay (and others) feasible.
Therefore, at the launch of Apple Pay, instantly customers have access to 700 000 merchants across the US and as this is an Apple backed initiative, other partners are quickly jumping on board including Kickstarter so you can fund those little projects with your Apple Pay system right from your iPhone or iPad.
And this summer, Marriott will get underway with its own Apple Pay rollout at select hotels including The Ritz-Carlton, Renaissance, and Marriott locations. “Guests using Apple Pay at check-in will simply bring their iPhone 6, iPhone 6 Plus or soon, Apple Watch, near the contactless reader at the front desk,” the company said in a press release. “There will be no need to provide a credit card upon check-in.”
Apple solved Digital Wallet issue
So Apple did what Apple does – it understood the market, understood the limitations and launched perfectly timed system and the world thought that once again Apple has single-handedly solved the Digital Wallet dilemma as no one else managed to launch with this many partners ready to accept payments.
You got to applaud Apple for their continued excellence.
*pic from https://www.apple.com/apple-pay/