While we’d all expected plastic bank cards to be replaced by apps eventually, the CEO of mobile banking startup Moven is suggesting that Apple’s backing could mean the end of physical bank cards within 2-3 years.
The additional sweetners here are three fold. Firstly, tokenization will avoid much of the type of breaches we’ve seen at Target and Home Depot because the token is only a one-time use thing. Secondly, the move to tokens and the combination of biometrics, etc allow for the emergence of a ‘cardholder present’ approach to interchange rates that will potentially give mobile payments a competitive merchant rate. Lastly, the US might effectively jump straight from magstripe to mobile, especially if issuers can figure out how to reduce the cost of card replacement by moving straight to mobile SE and tokens …
The U.S. has lagged behind Europe and Asia in switching from magnetic stripe cards to ones with embedded chips, for two main reasons, says Moven’s Brett King. First, uncertainty over standards, with some suggesting that Bluetooth LE/iBeacon might render NFC obsolete, leading to banks entering wait-and-see mode. Apple’s choice of NFC for Apple Pay means “that debate is over.”
Second, banks have been deterred by the cost of the switch. The cards themselves are more expensive to make, as are the more sophisticated payment terminals needed. If banks moved straight to mobile, however, the costs of EMV cards could be eliminated.
Apple Pay is supported by the iPhone 6 and iPhone 6 Plus, with the Apple Watch likely allowing mobile payment via older iPhones. Higher-end Android handsets also have NFC support, allowing them to be used for mobile payment with suitable apps.
If the idea of abandoning physical cards so quickly seems ambitious, King points out that the MINT markets – Mexico, Indonesia, Nigeria, Turkey – are already planning to move directly to mobile for new account holders, and that Apple has removed the final barrier to mature markets following suit.
Apple may have taken its time in adopting NFC, but just as it did with smartphones and tablets, the company looks set to move mobile payment into the mainstream.
For those skeptical of mobile payments adoption, POS retooling and Apple’s entry into payments signals the final hurdle to mainstream adoption […]
Apple’s entry into this space speeds up this shift, and guarantees a common standard across Visa, Mastercard and Amex networks around NFC and the use of Tokenization […]
A likely model for adoption rate for mobile payments in developed markets is 2-3 years, based on what we’ve seen around Kindle, iTunes, App and Smartphone adoption over the last 7-8 years.
The move may not be without its regulatory hurdles, however. A piece in The Hill suggests that Apple may have effectively become a bank.
Jason Oxman, CEO of the Electronic Transactions Association, the trade group for payment companies, said that use of Apple Pay may also create new privacy issues.
By moving into the mobile payment space, Apple might soon find itself subjected to new oversight from federal regulators.
“Rules that apply to plastic card payments also apply to payments with a phone,” said Moira Vahey, a spokeswoman for the Consumer Financial Protection Bureau (CFPB).
Apple is on record as stating that Apple Pay does not store card numbers (using a separate unique number to identify the card), nor log transactions.
“It was never a question for regulators or legislators: ‘Are you going to be using location-based technology for your credit card,’” he said. “Because your plastic credit card doesn’t know where you are. But your phone does.”
Via Finextra. Photo credit: AP.
