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An article relating to this blog post on Finextra:

Surprise! Apple makes payments play

After weeks of rumour, hype and speculation, Apple has made its long-awaited entry into the payments business with a compelling mix of NFC technology, tokenisation, biometrics and must-have mobile for...

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Card Present or Not Present?

When plastic cards become digital tokens, a strange thing happens. They become virtual. So how do you say that the Card is Present or Not Present, the legendary regulatory difference that the cards industry has relied on to differentiate between interchange fees for Card Present and Card Not Present transactions?

Apple secured Card Present preferential rates for transactions acquired by iTunes on the basis that the card's legitimacy is verified with the issuer at the time of registration and the token minimizes probability of fraud. If an API call to the issuing bank is sufficient to say that the Card is Present, who is to say that the same logic can't apply to online merchants who also verify the authenticity of Cards on File when they tokenize them? Then how can one arbitrarily say that the transaction processed with token from an online mercant is Card Not Present but the one processed with Apple Pay is Card Present even though both might have made the same API call to the bank to verify the card's validity?

I know, you are going to say that in the Apple case, a physical picture of the card is taken and used to verify that the person registering the card has it. Come on, it is not that hard for an online merchant to verify that the Card on File converted as a token does belong to the person performing an online transaction.

In the long run, as cards become digital and virtual through tokens, we are all going to wonder if card is present or not present. May be some will say "Card is a ghost" or some others, "Card is God!"

Card Present or Not Present

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 September, 2014, 09:49Be the first to give this comment the thumbs up 0 likes

All good questions although I won't ask if "Card is God!" Thanks to the friction caused by 2FA, Mobile OTP and PIN for CNP / CP transactions, I've already moved on from "Card to COD"!

A Finextra member
A Finextra member 15 September, 2014, 11:11Be the first to give this comment the thumbs up 0 likes

You're right that tokenisation paves the way for elimination of the CP/CNP delineation, however, that is still a way off.

The designation of ApplePay (for NFC use case only) as CP is not about the onboarding (API call to bank, etc) but down to the use of the SE and EMV - something which has always attracted CP rates wherever it has been used.

It is also worth nothing that there is one subtle difference here - this is one of (if not the) first occasions where CP rates have been afforded to a transaction where the issuer is NOT in control of authentication - a real breakthrough IMO.