the only way this other system will gain traction is when merchants start sticking customers with a surcharge for using a credit card instead of cash or this other payment system. Most merchants pay a four percent fee to process a credit card. One restaurant here in Chicago with two locations and 150 employees spends more than $125,000 a year on credit card fees. It is the third largest expense after building leases and labor. the restaurant spends more on credit card fees than it does on food. I have met entrepreneurs who are developing credit card processing systems that charge slightly less then two percent, but this still is a considerable expense. If Apple ever adds ACH transfers to Apple Pay, this system is toast.
On 4/11/15, M. Taylor <mk...@ucla.edu> wrote: > Hello All, > > As I have posted to this list, I am a big fan of Apple Pay, electing to use > it whenever possible. It facilitates the most convenient, transparent, and > independent in-store purchasing experience I've ever conducted. I use my > iPhone 6 Plus to buy items via Apple Pay no fewer than twice a week the > last > time being yesterday, at a grocery chain called Whole Foods Market. > > I came across this article that was mentioned but was not written by Mac > Daily News. They simply linked to the original article. > > So, I have pasted the entire article below at the bottom of which you will > find the original URL. > > Enjoy, > > Mark > > Apple Pay: Why CurrentC Is No Threat > by Mark Hibben > Apr. 8, 2015 > > Note from Publisher: > The author wrote this article themselves, and it expresses their own > opinions. The author is not receiving compensation for it (other than from > Seeking Alpha). The author has no business relationship with any company > whose stock is mentioned in this article. > > Summary > > .A consortium of retailers has announced that mobile payments system > CurrentC will start operation in mid-2015. > .CurrentC is a merchant-oriented payment system designed to circumvent the > current credit/debit card system. > .The lack of focus on CurrentC users compared to Apple Pay probably dooms > it > from the start. > With Apple (NASDAQ:AAPL) Pay becoming ever more widely adopted by card > issuers and more widely accepted by retailers, mobile payments was bound to > see new entrants. The latest to emerge is CurrentC, backed by a consortium > of retailers such as Wal-Mart (NYSE:WMT) and Best Buy (NYSE:BBY). It will > go > live sometime in the middle of the year. Does CurrentC pose a threat Apple > Pay? No, it's hardly credible competition. > > Cobbled Together > Whenever Apple comes out with a ground-breaking product, there's an > immediate scramble by its competitors to cobble together a solution that > superficially resembles the Apple product. The lack of attention to detail, > and the creaky, unreliable nature of these "competitive" products is > usually > immediately apparent. Such is the case with CurrentC. CurrentC represents a > direction that Apple might have gone if it hadn't come up with the better > approach of Apple Pay. > > CurrentC basically takes the iOS Passbook approach for gift cards, boarding > tickets, etc., and applies it to debit card payments. In Passbook, you show > a scannable bar or QR code that corresponds to some prepaid card, the > merchant scans this, and the value of the purchase is deducted. CurrentC > works the same way, except that purchases are deducted from the user's bank > account via ACH transfer. > > In effect, the CurrentC app user (there'll be apps for iOS and Android) is > authorizing the CurrentC consortium, Merchant Customer Exchange (MCX) to > make an ACH transfer from the customer's account to the member retailer's > bank. So MCX has to have stored your bank account information, and is > involved with every transaction the customer makes with CurrentC. > > In every important respect - ease of use, privacy and security - CurrentC > is > inferior to Apple Pay. Let's look at each of these areas. > > Ease of Use: > > Passbook kind of made sense if you had a lot of gift cards or prepaid cards > that you didn't want to carry around with you. However, the process of > presenting the scannable bar code in CurrentC doesn't appear to be > significantly easier than just swiping a debit card. Either way, you have > to > enter a pass code, and the time it takes to scan the bar code is about what > it takes to swipe the debit card. > > As an alternative, CurrentC merchant terminals can present a bar code to be > scanned by the customer's phone. Then, the CurrentC app sends the ACH > authorization request to MCX. This has all the pitfalls of smartphone > photography: the customer has to orient the smartphone camera properly, get > the bar code in focus, hold the camera steady, then take what amounts to a > picture of the bar code. Simple. > > While one might argue that this is no less convenient than swiping a debit > card, it's certainly less convenient than holding your iPhone over an Apple > Pay terminal. > > Security: > > The key pillars of Apple Pay security are ignorance, and ignorance. Once a > credit or debit card is added to your Apple Pay-enabled Passbook, Apple > deletes your card information from its servers, which was encrypted anyway. > From that point on, it's just between you and your bank, and Apple doesn't > know anything more about your card or your purchases with it. > > Ignorance is bliss. Ignorance means that Apple's vulnerability to hacking > is > very low. Most of the time, there's nothing to hack. > > The other important form of ignorance for Apple Pay is in the user's phone. > The iPhone doesn't even carry the card information around. Instead, it > carries a device ID (essentially, a random number string) that the bank > associates with your account. In addition, the device ID is stored in a > special chip called a secure element, which no other component of the > iPhone > - hardware or software - can access. > > These safeguards are mostly lacking with CurrentC. MCX does store customer > account information. It has to, for the system to work. MCX assures us that > the data is encrypted and secure. Makes you feel so much better, doesn't > it? > > The CurrentC app doesn't have a secure element to make use of, so that > layer > of security is missing as well. CurrentC does probably use a device ID > system similar to Apple's, but then, that can be sent (in encrypted form) > over wireless networks to authorize payment when the smartphone scans a > CurrentC terminal bar code. > > Privacy: > > MCX is very upfront in its pitch to merchants about customer privacy. There > is none. Merchants will have the opportunity to exploit customer purchase > history, in order to offer special targeted discounts and promotional > deals. > Your purchase data is an important product to MCX members. > > Merchant Benefit > This is a product architected not for the benefit of the consumer, but for > the benefit of the merchants who are members of MCX. Unfortunately for MCX, > the key feature most appealing to merchants will be the downfall of > CurrentC. CurrentC is all about circumventing the current debit/credit card > authorization system and the fees that merchants are required to pay for > each transaction. > > For that reason, it does not support bank credit cards, except for > merchant-supported cards. This makes CurrentC relatively inflexible > compared > to Apple Pay. Apple's decision to offer Apple Pay as an augmentation to the > current credit card authorization system was the smartest thing the company > did. It meant that card issuers got on board with Apple Pay with no > reservations. Apple now has more than 180 card issuers. > > Adoption of Apple Pay by retailers has been slower primarily because of the > cost of the new NFC terminals. Not needing NFC is the sole advantage of > CurrentC, but it will prove short-lived. In the end, CurrentC is just > another example of a group of businesses trying to fight the future. > NFC-based digital payments are the future, and Apple has skated to where > this puck will be. > > The MCX merchants will try to force customers to use CurrentC. They'll bar > Apple Pay, as some member companies already have. They'll offer incentives > such as discounts, rewards points, "free" gifts in order to encourage > CurrentC use. It may work for a while. Large retailers such as Wal-Mart and > Best Buy have some clout. > > MCX also has indicated that it might adopt other technologies in the > future, > opening the door to some form of radio-based (Bluetooth or NFC) payment > system. In that case, they'll be starting well behind the curve. In any > case, NFC-based payments will eventually replace all magnetic stripe card > readers. > > Impact to Apple > It almost doesn't matter whether CurrentC or any other competing mobile > payments system is successful. Although we don't know much about Apple Pay > monetization, we know that it probably doesn't work like conventional > credit > cards. Since Apple doesn't track user transactions, it's unlikely to > collect > a per-transaction fee, which is the norm for participants in the current > credit card payment authorization system. > > The most likely point where Apple can collect a fee is when an Apple Pay > user adds a credit or debit card. We know this doesn't cost the user > anything, so if anyone is paying Apple, it would have to be the card > issuer. > Judging by the level of support by card issuers, that fee, if any, must be > very reasonable. > > Judging by Apple's SEC filing for the December 2014 quarter, those fees are > probably negligible. Apple Pay revenue is booked under the Services > category, and Apple Pay came on-line in the December quarter. The Apple > Services segment booked only a 4% sequential gain over the September > quarter, going from $4.6 to $4.8 billion. Hardly a cash cow. > > The importance of Apple Pay is as a value-added service similar to iCloud > for iOS users. It enhances the value of the iPhone, increases sales, but > doesn't of itself generate a lot of revenue. From a revenue standpoint, it > almost doesn't matter whether CurrentC or any other mobile payment system > is > successful. > > As long as Apple offers the best mobile payment service, and the service > finds widespread support through NFC terminals, Apple Pay will achieve its > primary mission of making the iPhone even more desirable. > > Original Article at: > http://seekingalpha.com/article/3056906-apple-pay-why-currentc-is-no-threat > > > -- > The following information is important for all members of the viphone list. > All new members to the this list are moderated by default. 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