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Apple Pay Attention
Thursday, November 6, 2014 6:25 AM

If Apple Pay is not the “end-all” in mobile payments, as some analysts contend, then it sure scared the market space. Numerous entities in the online and mobile wallet space changed course and began rethinking their technology shortly after Apple’s announcement.

The loyalties of the Merchant Customer Exchange's constituents are being tested with its retailer-consortium project CurrentC. Some retailers sided with MCX and shut off Apple Pay, a move that is forcing MCX to be more outspoken about its contractual terms. MCX may also begin supporting NFC, the same contactless payment technology Apple Pay uses.

The MCX merchants that shut off Apple Pay also took Google Wallet, Softcard and even contactless plastic cards offline with it. But Google is slowly adapting, and issued an update to Google Wallet that adds alerts and other features to keep its users engaged. So, the trade association may be shooting the wrong foot; their members!

MasterCard sees Apple Pay as a launching point for tokenization, a security method that protects account data by substituting a limited-use token when making payments. Now that the technology is part of Apple Pay, MasterCard plans to adapt it for its own MasterPass digital wallet.

At the merchants that still support multiple NFC wallets, Softcard is getting a boost from Apple Pay's debut. For example, the training that McDonald's put in place to encourage Apple Pay use at the drive thru also benefits Softcard, the telcos' (AT&T, T-Mobile and Verizon) mobile wallet is even explicitly promoted in McDonald's marketing. Softcard also plans to work with the iPhone 6's built-in NFC chip.

It's not clear what kind of "marriage" Alibaba founder Jack Ma has in mind for his company's Alipay affiliate and Apple Pay. But one possible partnership could see Alipay become a funding mechanism within Apple Pay, giving the Chinese company a strong foundation in the U.S.

LevelUp by Cambridge, Massachusetts-based start-up SCVNGR (“Scavenger”) was fast to get on board with Apple Pay, despite offering a competing wallet. The company already uses Apple's iBeacon technology, and plans to integrate directly into Apple's Passbook, making the LevelUp wallet a payment option alongside bank-issued payment cards.

PayPal, which competes directly with Apple Pay, has long avoided using NFC for contactless payments. Now PayPal said it will start supporting NFC if Apple Pay creates enough consumer interest.

Apple Pay is forcing banks to develop their own mobile wallets, according to BBVA's Jon Groch. BBVA plans to port its Android card app to iOS to entice consumers to pick its card to pay. "If we didn't have this mobile wallet customers wouldn't even know what wallet they're using when they use Apple Pay," he said. (Actually it is the customers won’t care what wallet they’re using.)

So, for credit unions, it may be a confusing time, especially considering that an industry CUSO in California is promoting CUWallet, and several back-office information processors, like Fiserv, are offering their own version.

 

Source:  Payments Source and Cornerstone Research, Nov. 3, 2014.