Apple is in talks with Visa as it ponders launching a mobile wallet this autumn, according to tech site The Information.
The latest bout of rumours suggest that the ability to make instore payments could finally arrive with the iPhone 6, although The Information's sources offer contradictory takes on the technology, with one saying that the system is likely to be NFC-based and another suggesting that it will rely on Bluetooth and WiFi.
The report suggests that Apple will not be going down the host card emulation route, instead making use of the Secure Element, although the famously proprietorial tech titan has no intention of "giving up any control to wireless carriers".
Apple hopes that working with Visa will also help it bypass the payment processing chain, helping it to lower costs for merchants and customers, says The Information.
This is a bit contradictory...
1. Apple has indicated in the part that it would probably prefer to remain as a platform provider rather than financial instituion - hosting a VISA based Wallet is, therefore, not inconsistent with this.
2. Not clear how VISA helps you "bypass the payments processing chain" - at some point you need to authorise/process/settle a payment and somebody needs to do that - VISA migh help but at some point some technology required at POS to deal with this - NFC/Bluetooth
or mobile do not get you round this and retailers are not just going to allow Apple or VISA to introduce technology into their stores to do this
3. Making use of the secure element is interesting but points to a closer tie up with a financial institution and not sure how you get access to provisioning the secure element without some interaction with wireless carriers.
All exciting stuff but as vague and indistinct as ever...
Apple is likely to use both NFC and BLE, IMHO. It's hard to implement payments in a busy (i.e. multi-user) environment with BLE alone.
US banks now have a dilemma: to follow Apple (SE) or Google (HCE). Each approach requires different TSM structure. SE route is in line with EMV (global!) efforts - that's where I'd place my bet.
An Apple and Visa arrangement of some sort would be huge for both brands. It would be highly logical and enhance them both at a stroke!
Payment step changes have always followed sensible co-operation. Customer convenience and usability will be the key to success as the technology, while exciting for purists, is simply an enabler.
Apple's play is simple: enable more services on iOS to drive up sales. Payments (and transit) are compelling "mass market" use cases that touch billions of users.
I have many (strong) reasons to believe it's not just Visa that Apple is negotiating with...
If I were Apple, I'd borrow disruptive "zero Capex" business model from MultiPass and offer banks free access to SE.
I wonder whether Apple can fight off mobile operators better than Samsung did... MNOs were greatly upset about embedded SE in Galaxy S4 and made sure it didn't fly...
+1 re Harin's comment. HCE can make use of an SE (embedded or otherwise) depending on the model/integration applied. And imho as Alexander implies, BLE/NFC could be made part of the same payment journey.
US MNO and SE 'ownership' and management model may be different to UK's(?) with more lattitude re SE and TSM provisioing (for me a real pain, and if you don't need it then don't use it).
HCE is a displacement that kind of knocks TSM/SE management off the NFC 'must have' block. I suspect the Apple solution will be limited or constrained to start with, but who knows.. "All exciting stuff but as vague and indistinct as ever..." again.
HCE requires tokens - which, in turn, rely on cloud connectivity. There are thousands of stores in central London with no or patchy network coverage. (You can pre-load HCE tokens, but that still makes it hard to implement consistent UX.)
SE allows to overcome that problem.
Thanks Alexander, I get it but you can (depending on the size of the payment/transaction) decide to configure/build the HCE app to comunicate with the SE for other secure account (non-token requiring) information, say for high value payments. But, as you
say, seamless and good UX will be the tricky bit...
To me, the key to this whole thing lies in the statement "Apple hopes that working with Visa will also help it bypass the payment processing chain, helping it to lower costs for merchants and customers,...".
By issuing a mobile-only Line of Credit for all cards on file in iTunes, Apple can get 700M customers overnight and bypass the issuer bank in the process. Many retailers have already announced plans for iBeacons. Ensuring that they support instore payments
frictionlessly could result in the acquirer bank getting disintermediated. A tieup with Visa will ensure open loop payments. By cutting out the issuer and acquirer, Apple could in a position to offer lower MSC / MDF to merchants, which will give merchants
the compelling reason to step up their investment in new infrastructure. Maybe this would require Apple to get a lending / banking license.
If all this happened, mobile payments would be one more industry that Apple would succeed in where others before it have failed.
Based on all the comments, I would say that we do not know what Apple is planning, only that they are planning something.
@AlexP: Fees and / or interest charges for LOC.
@ChrisY: You're absolutely right.
@AlexP: Agreed in terms of market cap but not necessarily in terms of profitability: Financial services was the most profitable industry in the last FORTUNE 500, ahead of tech.
© Finextra Research 2016