Whose Payments Platform is it Really?

Amit Bhute
VP & Global Head – Payments Practice

I have been following the battle closely between Australian banks and ApplePay for quite some time. What’s interesting to see is this battle has implications well beyond Australia. I still remember when ApplePay was first announced. US retailers banded together under MCX (Merchant Customer Exchange) to build their own payments solution, CurrentC. CurrentC wasn’t very successful for many reasons including the absence of a good payment method, weak security, and internal politics within the consortium that ultimately had to satisfy needs of the varied retailers.

However, it was important to understand that two primary elements drove the battle.

  1. The ability to avoid typical fees (2-3%) charged by players within the card issuing, acquiring, and networks
  2. Information about the payment is becoming just as important as payments itself; ApplePay prevented retailers from accessing this critical data.

Mobile Payments

Concerning the Australian context, in a submission to the competition regulator on Jan. 31, Apple said that opening up its contactless payment system to top banks would give them a free ride on Apple’s investment in technology.

This is a very weird line for Apple to take. Ultimately, isn’t ApplePay itself using the credit card network built by banks and network? ApplePay essentially provides secure and customer friendly access to card data stored on the device. However, it’s still a stored card (in the form of token). ApplePay would not exist without banks issuing the cards as well as the clearing and settlement mechanism provided by the banks and networks.

There are many players in the mobile payments area that all want consumers to use their payments app including

  • The technology giants who own the OS and device through which the payments are made
  • The telecom providers who missed the bus but launched their own payment apps (remember O2 wallet in UK and Airtel money in India?)
  • The merchants themselves – AmazonPay, Paypal, and AliPay
  • Banks launching their own private label wallets like ChasePay, CitiPay, and the like
  • FinTech Players like PayTM and Square building their own platform using the existing banking rails
  • Network providers like V.me by Visa and MasterPass by Mastercard

In a payments lifecycle, each of these has a critical role to play. The value is delivered by the merchant to the consumer, and the consumer pays them with money she has in her bank account through a payments instrument via the clearing and settlement schemes.

In this case, can Apple really claim that the platform belongs to them and not allow merchants and banks access to their secure element in a controlled fashion? The verdict is still out, but my vote goes for asking Apple to open up its payment API/secure element to regulated authorities who are willing to bear liability. This will spur a host of innovation in mobile commerce beyond just payments.

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