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October 03, 2014



Tomi, you make some valid points, but you forget something important: it doesn't matter that mobile money is exploding in Africa, since Africa is not even close to being a suitable market for iPhones.
So yes, adoption of mobile money is faster in Emerging World; but adoption of iPhone-level priced smartphones is not.
Apple can't play the "Africa" card.

So what do they do? Naturally, they focus on the industrialized world. And primarily, on the USofA. It would be foolish for them not to.

You raise an interesting point: it's unlikely that Japan or Sourth Korea, with established mobile payments solutions, will rush to adopt Apple Pay. But will it catch on in the US? Maybe! Yes, it would be a pain from a compatibility standpoint - but I remind you that the largest american network is on CDMA, and it's much more inconvenient today to be unable to use your mobile when you travel abroad than it is to be unable to make mobile NFC payments.
So yes. Long term, Apple Pay is very likely to be dead technology. But in the long run, we are all likely to be dead :). Short-medium term? It may still see significant success in the US. I think it's 50/50 at this point (or at least 25/75) - anyway, it's premature to declare it a 'fail".


If Apple Pay succeeds in the US, that would be enough. NFC payments have not taken off here. Apple didn't just through an NFC chip in its phones...they got the 3 market making CC companies, and a good number of national retailers on board with a complete working ecosystem (there's that "E-Word") again. Europe has had "Chip and Ping" for their credit cards for some time, but in the US we are still on mag stripe.

Apple is adding biometric security and ease of use. The reduced fraud alone is why the CC companies are paying Apple 5 cents out of $100 (or something like that) when processing payments via Apple Pay.

SMS does not have biometric security.

Google Wallet has gone nowhere in the US. Paypal lost out big time by teaming up with Samsung making Apple drop them from consideration to be part of Apple Pay rollout.

You don't have an you might not yet understand the advance that having a fast, reliable fingerprint identity verification on your phone is. Apple proved the technology last year with limited use cases (unlocking your phone, paying for Apps). The unlocking the phone with my thumb instead of typing in a complicated (corporate control/mandated) password was a godsend. You know how many times a day you unlock your phone?

Now with iOS8, the TouchId has been opened up for 3rd party apps and soon Apple Pay. I can now open my 1Password app with the touch of a thumb instead of typing in a password. Of course, over time, on the phone even that will be unneeded as I'll open every password protected app just as easily.

For payments, it's not merely possession of your phone with NFC that is at play. It's the biometric verification of identity. You can steal my phone, but you can't use your thumb to validate payments with it.

Now yes, with enough effort you can spoof the fingerprint reader. FAR easier to compromise the mag stripe credit card that you hand to a waiter who walks away with your card.


Wow! Awesome article!!!

I've used NFC payments in Canada, and the biggest issue was lack of NFC terminals. Most merchants have no incentive to install or activate NFC terminals. Even my bank that was promoting their wallet app for NFC payment didn't bother to install NFC in their ATMs or at their branches!!!


@AppleTurfer - The fingerprint scanner provides minimal extra security, it does not even compare with a 4-digit PIN.
You need to understand that 2-factor means "something you have" + "something you know".
That mag stripe is not "something you know", it plays the role of the phone (i.e. "something you have"). In the entire civilized world (minus USA), that stripe is insufficient to make any purchase, if you don't also know a PIN. Yes, via 3-DS you can make sure that the plastic alone is not enough for anyone to use your card, even online (well, I guess some merchants may still decide to accept it, but it is exclusively at their own risk).

Now, contrast the PIN with the fingerprint: the finger is still "something you have", if I have your phone I might as well have your fingerprint. E.g. if a TSA agent wants access to all of your credentials, if he has your phone he can definitely get your fingerprint, but he may have trouble forcing you to 'remember' a PIN.
If someone is stealing your phone, and really wants access to all your data, now all he/she has to do is spoof your fingerprint. Hard, yes, but far easier than finding your 1password master key, don't you think?


"...So yes, nice that even Apple finally ‘gets it’ about mobile money. Nice that they have created their mobile wallet but a proprietary version built on top of industry-standard NFC system so once again, Apple isn’t standard and now a merchant has to opt for Apple Pay only?..."

Actually that is not true Tomi...merchants don't have to opt for Apple pay only.

"...But rest of the world will definitely utterly ignore Apple’s selfish proprietary NFC mobile wallet and go for standardized payments systems instead. Why can’t Apple for once do a standardized solution right out of the box?..."

Because no one else has a fingerprint and biometric tech like Apple. TouchID is far ahead of anything that others have (Samsung's scanner is slow, buggy and doesn't work very well). So, other companies need to catch up.


Virgil - a 4 digit pin is not nearly as secure as a finger biometric. There is more too the Apple solution involving one time use tokens and other highly secure cryptographic measures. Not for nothing are the CC's giving Apple even this tiny piece of their transaction revenue.

Quibbling over that isn't germain, though. Tomi is right that this will initially be a US centric offering. It is not going to catch the world by storm or become the "new money for the third world".

Google has had a solution in the American market for some time and it just hasn't gotten traction. Apple has the kind of clout that comes from it's desirable customer base that can make markets.


It's not that Apple "finally" "gets it" with respect to mobile payments. Tomi doesn't understand just how antiquated our payment systems are in the US. Heck, we still write checks every once in a while, and are just now getting chips in our credit cards! Google tried to launch NFC payments in the US. So did AT&T, Verizon, and Sprint (through the unfortunately named Isis Mobile Wallet). There's a huge retail lobby in the US that resisted change since it had no incentive to do so (they had no liability for fraud until this year). So what Apple did was play smart follower (not necessarily fast follower). They saw what worked and what didn't work. There's no guarantee it will succeed in the US, since Wal-Mart isn't signed on, but they did manage to get a lot of merchants signed up. Plus, the addition of TouchID adds a security element that may help it get traction in light of all the recent security breaches hitting banks and merchants.



"I also disagree that this will be US-only for long. I think it will spread relatively fast for the countries with good (10%+) iPhone penetration."

We'll see. The major problem I see here is that, should it catch on, there MUST be a general solution. Nobody - especially politicians - would want to see a company like Apple gain control of the payment market. And nobody would want to see an outcome with 3, 4 or 5 incompatible solutions. That sounds like a total nightmare.

Also, 10% is far too low a figure. Say 20% and I may agree - unless Apple subsidizes the entire operation. And honestly, THAT I don't see happening.

If you ask me, what Apple did was a good first step but their compulsive need to create a proprietary solution depending on Apple hardware will make it very specific to a few isolated markets with very specific issues in their current payment system - that also happen to be some of Apple's strongholds.


@RottenApple - nothing I've heard says this is an Apple only solution. Apple is providing end point end user ease of use, but the machines themselves (not the phone) can work with chip and pin credit cards. Right now there is no standard in the US and several companies (including Visa, Google, others) have tried and failed to get traction before.

Apple is just extra incentive for retailers to support the new "card" reader devices. Anything to attract those most likely to spend money. The new devices the stores buy will be very unlikely to only support Apple Pay.

This is not Apple trying to own payments. Just another "why it's so nice to have an iPhone" feature and a few hundred million or a couple billion a year in transaction revenue.


This article is a good starting point to discuss cash and the modern world.

In the US, their is a pushback against going to a cashless society. Some of the reason are ... old timers who fear new technology; the desire for private transactions such as, yes drugs and black market type goods, but also 2nd hand items bought and sold locally through classifieds; and finally the culture's disdain for those who don't use cash. Their was a time when you were thought less of when using a credit card to pay for items in the express lane (10 items or less). Some comedian's routines included rants about those who don't carry enough cash to buy a pack of gum.

Media (games, movies, books) is to blame as well by showing depictions of brief cases full of bills, fat wads of cash in money clips and helicopters dumping money onto city street. America doesn't want to give up cash.

Getting people to move from debit cards to smartphone payments doesn't appear to be the issue in the US. Getting rid of cash in the first place is the larger hurdle. Which brings me to my prediction ...

Cash won't ever 100% go away. As long as someone believes it has value, it will exist and be used as such. See Bitcoin for an example. I want to say Bitcoin is 'virtual nothing' but that's not true. Its CPU cycles if nothing else which kinda represents a unit of energy. The people who accept Bitcoin don't know that or care. Its simply believed in as value.

Where cash will exist is in the lower and working classes as its own inter-currency. Starting directly with the food industry and tips. People will pay for their food/meal with electronic currency (FOR THE MAN) but then pay with cash as a gratuity (FOR THE WORKER BEE). Clarification, poor people will tip in cash. The rich won't touch it. It will be the under-money shared and distributed among a circle of those who consider themselves poor. The government could even stop supporting it (accepting it as payment for taxes, bills, fines), but as long as people continue to accept it, cash will have a life of its own.


Another quick example. Portland, OR food carts are cash only. Shouldn't wireless payments be dominating these types of transactions? Not on the West Coast it seems. There's an ATM machine located at each outdoor food court location, even though they could use a phone with a square reader as a cash register.


How is e-money "perfect" for the average punter?

It means somebody with no real relationship to the transaction:

1) knows all the details.
2) collects a rent on every transaction.

A very very anti-public idea and only one that benefits the rent collectors in the long run.

adi purbakala


Vienam & indonesia has more cc fraud used to.
Now vietnam & indonesia use chip on cc. Fraud gone.
USA no need apple. USA need chip on cc.

Wrong sample. CDMA is DEAD everywhere.
HK CDMA dead
Korea CDMA dead
Australia CDMA dead
Indonesia CDMA almost dead
USA CDMA almost dead



"In the US, their is a pushback against going to a cashless society."

Not only in the US. The same sentiments exist in many other countries as well - and it's not just old people feeling that way. A major issue is that a lot of people fear how technology develops and how everything is getting abused by secret services like the NSA to monitor everything they can. So, if all money transactions get transferred to the internet there will inevitably be a revolt in a society that is wary of surveillance.

"Cash won't ever 100% go away. As long as someone believes it has value, it will exist and be used as such."

I can understand, of course, that business owners want to get rid of cash. For businesses cash is a security risk, handling of cash probably costs a lot more than making cash-free transactions and of course cash is dirty.
Let's also not forget that over 90% of payments people do is already cash-free in most countries. I never see my salary as physical cash, I don't pay my insurances or my monthly bills in cash, when I go shopping in the supermarket, I normally use a plastic card to pay, and so on. I'd use it more if more places would accept it, but there's some restrictions (e.g. €10 and above) and some smaller places simply won't accept cash-free payment. I believe, though, that many of these issues will be solved over the coming years and the use of cash will reduce dramativally.
But will all this eliminate the need for physical currency?
Of course not!
What some people seem to forget is that paying in stores is not the only area where money is needed, there's always some fringe cases where such a system simply cannot work, no matter how advanced technology becomes.

"The government could even stop supporting it (accepting it as payment for taxes, bills, fines), but as long as people continue to accept it, cash will have a life of its own."

... and without cash they'd switch to something else that's being deemed of value. I've been thinking a bit about the Turkey-thing Tomi mentioned - and my personal prediction after the abolishment of physical items representing the local currency is that people will just switch to other currencies that are guaranteed to have value for the foreseeable future - most likely the US Dollar and Euro. Especially if a government's goal in abolishing cash is to control the black market - which seems to be the case here - rest assured that the black market will find its own way of doing things.


As in mobile, the USA lags a decade or so in payment technology.

CC fraud is so big in the USA because they are virtually the only ones stuck on using them.CC payments are a stopgap. I hardly use cash and use CC only when I have business within the USA.

Jonas Lind

Even though cash is a primitive payment system I think it is very important with backup systems for something this important. To have just one payment system in society makes it unacceptably vulnerable. We need several independent payment systems.

We must also remember that cash is the only truly anonymous way of payment. This is incredibly important as a means of reducing the power of the surveillance state. If all payments in society are logged we will immediately get an Orwellian nightmare where the authorities can trace your every move.

All over the world, the quality of democracy is undermined and deteriorating. A country can still nominally be a democracy but use its security-surveillance apparatus to track down activists who try to raise funds for protests against for example fracking, GMO-crops, separatist political parties or investigate corruption in government. If people can’t donate cash to these causes they expose themselves to government harassments, being fired if they are employed by the government, etc.

This argument in favour of cash (or similar untraceable payment methods) is not a luddite objection but have been put forward by the techno-utopian Pirate Parties and Assange/Snowden. Personally I try to use cash as much as possible for this reason. Keeping cash alive is a very important civil liberties issue.


@Jonas Lind:

Well said words.

The last time this came up I already voiced my doubts and all the NSA-related horror news only confirm my view.

Transferring all payment to the internet is an act of insanity, plain and simple. Especially if you don't have some form of backup in case if system failure. Abolishing physical cash would remove that safety net from the picture, creating a system vulnerability of such enormous proportions that's completely unimaginable.

Any nation trying to do without physical money could be crippled by external forces easily. Their enemies just have to make sure the internet breaks down and everything stops working. How anyone can even propose such a thing (and hail it as progress) is beyond my comprehension.

I also think it says a lot that a country like Turkey with very questionable democratic structures is the first trying to abolish cash. It tells us a lot about how their political leaders tick and it's quite clear that this is not being done to do the population a favor but to exert another means of government control.

This is a clear case that not everything that's technologically possible should be implemented. I'm also certain that awareness for such issues is rising. It is something that didn't get much exposure in recent years but I think that's going to change.


Thx Tomi..

Indeed.. took longer for rest of world to wake-up on NFC than I expected. Funny thing, predictable enough, is how much of the focus is related to $$. The tap & go of 1's and 0's enables far more compelling use cases, as we have long seen here in Japan, kinda like how the camera-phone evolved.. 8-)

As always = interesting times ahead.. !_!



> Now, contrast the PIN with the fingerprint: the finger is still "something you have"

More worse its the very first thing you leave and spread everywhere you go.

On top: you leave your fingerprint also ... direct on your touch smartphone. As if fraud isn't made easy enough, you can also change the fingerprint once the phone is unlocked. Now we better not ask for iOS (aka jailbreak made easy) and iCloud (aka nude promi selfis, ups) like-security to remote-rob. We also better switch to silent mode like about the uncertain fraud/lose/hack liability situation.


I work in mobile identity and will just say "you folks don't know what you are talking about" and leave it at that. Visa, MC, Amex and Discover are giving Apple a part (small part) of their transaction fees without charging the customer or the vendor. That alone lets you know that these people are putting faith in Apple's solution reducing fraud.

BTW, Apple is only augmenting, simplifying the user experience. The CC business still belongs to the banks and CC companies. Apple is not putting out their own standard or disintermediating the CC companies.

Apple customers will get ease of use and one more reason to pay the premium for their iPhone. Retailers will be that much more attractive to the most lucrative customer base. CC companies get reduced fraud. There is enough business in the US with just those facets to make this worth doing for Apple and to get the partners on board.

Android will also see a nice boost. Apple will drive adoption and Android will mop up with a it's much larger customer base. Again, speaking of the US where magnetic credit cards are still used.

Places that are using SMS money, already have chip and pin, are do not have credit based economies will carry on as if Apple Pay was never released.

Even in the US it will take time to roll this out. Consumers don't care about the fraud of magnetic strip because they don't pay for it (well, we all pay in higher interest rates and transaction fees). A mag stripe credit card is easy enough and familiar so consumers have little incentive. Retailers resist this change because they are the ones having to pay to change out or add to their CC terminals to support chip and pin. CC are the ones most interested in driving this change. To this end, they have set a date past which they will refuse to pay the fraud charges on mag strip transactions. Thus Apple has come out with their solution at a well timed inflection point where retailers already have to pay to change their equipment.

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