Apple Pay’s seminal moment in the payments industry occurred on 20th October 2014
It was the day Apple Pay was launched and used for the first time.
Six and half years later, millions of us around the World use it daily. As a payment convenience. But most of us are not aware what it actually delivered and why it matters to us personally.
Prior to Apple Pay
It was not the launch of Paypal, a welcome competitor especially for the smaller guys. It was not existing cardless or contactless payment mechanisms that defined the moment. Though these innovations spell convenience, efficiency and speed of payment.
PayWave by Visa or Mastercard’s PayPass are examples of contactless payments. No different to payment tokens used by the transit sectors for rapid movement thru gantries.
In all these, embedded chips in the card and tokens are read by point-of-sale readers via RFID or NFC signals.
That journey began in 1995 when South Korea introduced the first contactless payment for their mass rapid transit system. Iterative progress in the main.
Private Way = Privacy
Apple however did something that has always been part of their DNA. Something they say little about but practise it like a religion. That religion is privacy.
This is Apple’s official press release four days before the launch in 2014. “New Service Offers Easy, Secure & Private Way to Pay”.
Note the term – “Private Way”. Seems odd isn’t it? We are familiar with “Easy” and “Secure” as they popular marketing jargon but “Private Way” was new.
“Private way” means no part of your card details or your identity leaves your iPhone.
Merchants or their cashiers do not see, receive and therefore cannot retain the card and personal identifiable details. Zilch in all sense of the word. All they is an approval code or decline code and some reference details.
Tokenisation is the industry formal term for this approach. . All necessary details to trace a payment for audit, reconciliation and dispute resolution are replaced by token data. Only decipherable by going thru a secured digital vault.
Unprecedented in the payments industry.
Apple partners others to deliver Apple Pay
Credit also goes to Visa, Mastercard and Amex and 13 founding banks that worked behind the scenes with Apple to build and deliver Apple Pay. This level of partnership is also unprecedented. Visionaries.
Competitors in the payments space coming together and collaborating on an initiative that was not called upon by regulators is a rare event. Only herding cats is tougher than this.
Industry reacts
Samsung knew its value to the public and followed suit immediately with Samsung Pay.
Walmart, World’s largest retail chain on the other hand refused to accept Apple Pay. Paypal went ballistic and ironically questioned of all things Apple Pay’s security.
But others in retail like Sephora, Nike, Whole Foods, Disney and much of the retail sector in the US were ready on launch date.
Personal card data does not cross over
More on tokenisation. Check your payment receipt from the cashiers after using Apple Pay. Nothing matches your card account.
Merchants no longer could harvest customer details with the same ease from card payments for their loyalty, marketing and retention programs as in the past. At least without seeking consent and details from the customer.
Interestingly in one swift movement, it also hit the card fraud industry that for decades used stolen card data.
That includes service staff stealing card data by looking at customers’ cards and then buying items over the internet. Another source for the manufacture and use of clone fraud cards had also dried up.
We therefore now receive less calls from Banks informing of fraud on our card and the need to block and replace it.
What people think?
Today if asked, I bet that 95% or more of people are not aware that their purchase receipt do not have their personal or card details.
A result of what Apple and Apple Pay did on 20th Oct 2014. A seminal moment for payments. It’s the day privacy and security returned to the consumer.
Central to the architecture is a second and dedicated chip in each phone that stores the card data securely. That data does not reside outside even in the phone’s IOS or in the cloud.
Today 109, Australian banks, credit unions and financial institutions offer Apply Pay to their customers and thousands of merchants big and small accept it. They respect privacy and afford us security.
Commerce can work with privacy
Apple Pay’s seminal moment is a lesson that commercial value can be realised while operating in the moral and ethical space.
And not to forget that it is cardless, contactless and provides unprecedented speed in payment execution. Fully authenticated via finger print or facial recognition.
Hopefully I will cover Apple’s approach to privacy over the years as an observer that impacts our family and us in another post.