Apple Pay Rival Systems Will be Costly Failures

| Particle Debris

It seems that too many corporations and banks want to create rival alternatives to Apple Pay. They have their own agenda for inserting themselves into the payment process, but always seem to forget that putting themselves ahead of the customer with half-baked, potentially problematic systems is never the right thing to do. Most will have to learn the hard way.

Apple Pay AMEX

First, there was CurrentC from the MCX Consortium. The idea there, inspired by Walmart, was to avoid those pesky discount fees the banks charge on each credit card transaction and pocket that money themselves.

Their process: withdraw the money directly from the the customer supplied bank account number. Brilliant, right?  CurrentC died a slow, tortured death. “CurrentC Rolls off its Deathbed and into the Grave.” Even Walmart saw the handwriting on the wall and introduced its own payment system, Walmart Pay.

Next, we had Samsung Pay which uses a less secure technique that still depends on the vulnerable magnetic stripe reader. It was inevitable that a hack would be discovered. It was. As TMO’s Jeff Gamet explains,

Researchers demonstrated the hack at this year’s Defcon, as noted by The Verge. It relies on Samsung Pay’s magnetic secure transmission for use with traditional magnetic stripe readers. Samsung devices with this feature generate a magnetic field that transmits transaction information—including a one-time token—to a stripe reader.

If that wasn’t enough, three Astralian Banks collectively want access to the iPhone’s NFC subsystem so they can concoct their own payment system that bypasses Apple Pay. Apple has said “No!” and isn’t shy about pointing out the security implications. “Apple says opening up iPhone NFC would ‘fundamentally diminish’ security as Australian banks resist Apple Pay.

Last, but probably not the end of this trend, is the announcement by CVS Health this week that it has ginned up its very own payment system. The article I saw was at PC Magazine. “CVS Pay Aims to Rival Apple, Google.

The cleverly named CVS Pay allows customers to make payments, pick up prescriptions, and earn ExtraCare loyalty points with one scan at the checkout.

The major problem with this payment system has been adroitly analyzed by Jonny Evans at Apple Must. “Is CVS addicted to wasting money?

Here is how customers shop with Apple Pay: Pull out the iPhone or Apple Watch, tap, choose payment card, pay.

Here is how customers shop with CVS or Walmart: Pull out the iPhone, open the app, tap the app to find the correct section of the app, show their device to someone on the desk, that person will scan the app, customer chooses the payment card and pays.

It’s a Rube Goldberg system that will have customers asking why they can’t just pay more simply.

Sure, We Can Do That!

In summary, there are at least three major problems with these alternative payment methods to Google and Apple Pay that use NFC.

  • The method is typically self-serving, putting the company’s needs before the consumer’s. The user experience is awkward.
  • The organization implementing the alternative typically doesn’t have sufficient security expertise, access to the hardware and software integration of the iPhone nor corporate resources to roll out a uniform, secure national initiative.
  • The pipe dream of securing and exploiting all that collected customer data turns out to be more expensive and technically difficult than the rosy predictions proposed to management.

Having a different payment mechanism for many different merchants is a wearying experience, and soon, I predict, after some expensive experiments, merchants will discover that it’s a more secure, less expensive proposition to use existing loyalty systems and then simply take the customer’s money with chipped cards and, eventually, contactless payment methods already in place.

But they’ll have to fail first to discover all that.

Next page: The Tech News Debris for the Week of August 8th. More money please!

10 Comments Add a comment

  1. I seem to remember the early days of credit cards were the same. You could have a Sears card, and a Goodyear card, and, well the list went on and on. Soon the stores discovered that it was a pain in the @$$ to maintain the credit cards. My Goodyear card became a MasterCard. My wife’s Target credit card is actually an RBC Visa card with Target on the front.

    I expect the same to happen with all of these store-brand payment systems.

  2. Absolutely drooling over the new MacBook Pros. I do hope the USB-C ports (four I hope) are also Thunderbolt-3. We will see. Now as far as when: iPhone in late September. Figure 3-4 weeks before the next event. That’s late October. Wait for a few reviews. Oh there’s the Christmas rush. I guess not going to see it till early 2017.

    Mixed results on my cord cutting experiment. I now watch much less TV. But the big price reduction when I dropped to a minimal package turns out to be just a introductory offer, my cable bill will go up in September costing over half of the monthly savings I thought I was getting. Part of me wants to tell them to f*** it and cut cable completely. Part of me that hasn’t taken to Netflix wants to say f*** it and go back to a full package. SWMBO will probably decide.

    FWIW, LOVE my SE.

  3. Walmart, Apple Pay, CVS Pay are all competing and the customers will ultimately decide what works. I can’t blame Walmart or CVS Health for wanting to control their own system and not pay Apple’s fee to use their system. I do know that the systems we have currently ( chip cards ) aren’t nearly as convenient as just swiping my credit card. The interaction at the register for me is something like:
    Me: Swipe my card
    Cashier: you have to insert the card , we just activated the chip reader
    Me: inserting the card
    Me: waiting for the “Remove card” message
    Me: signing the transaction because it’s over $50.00 USD
    and this doesn’t count the times I see a PIN reader and try to use it but the cashier says they aren’t using them yet.
    So, are chip cards more secure? Sure. Is it more convenient, no. Even Apple Pay ( or other NFC services ) isn’t nearly as convenient( or quick ) as swiping a credit card. Sure, technically it should be quick but not all retailers accept it. Plus then you have to ask the clerk and sometimes they give you this ‘huh?” deer in headlights look meaning they don’t know if they accept it or not. You try it and it fails. In the time it took me to have that conversation with the clerk and try Apple Pay, I could have already been in my car driving home if I’d just pulled out my credit card and swiped.

  4. rocwurst

    Your retailer or POS vendor obviously has no idea what they are doing. Here in Australia, you tap your contactless credit card on the PayPass terminal, it beeps and almost instantly you’re done unless you want a receipt printed which takes one button press from the cashier and bang you’re off. No buttons to press, no wait. If the value is over $100, you just type your pin code and that’s it. Signatures? How primitive.

    Of course if you use Apple Pay with an Apple Watch, it’s even better – just press the side button on your watch and tap the watch to the receiver and bang you’re done. No fumbling with two hands while holding your shopping to get your credit card out of your wallet or purse and because it is so secure, a growing number of providers do not impose that $100 cap on purchases.

    Far quicker, vastly more secure and easier than virtually ANY other way to pay.

  5. The banks, and merchants, are all desperately trying to avoid the charges incurred by using the card networks (and/or take a slice of those fees themselves…)

    That’s what is driving these attempts to create new payment networks, and the only way Apple and Android Pay can help with that is if they start supporting other funding mechanisms beyond cards.

  6. @rocwurst I suspect our United States adoption rate is probably slower than Australia. The issues presented in my post are real and can be experienced at many USA retailers and other brick and mortar vendors; they are not limited to only certain vendors.

    “No fumbling with two hands while holding your shopping to get your credit card out of your wallet or purse and because it is so secure”

    Most stores here have nice convenient conveyer systems to hold everything you’re buying, so when you’re in the payment process your hands are free. Retailers here typically bag all your merchandise for you( in my grocery store they offer to take it to your vehicle and load it for you too ), so grabbing a credit card and swiping is super easy. That’s one hurdle I see for these new payment systems: the current swipe and go system is easy ( less secure – yes – but easy ).

  7. I love trying out new apps, I would say there’s something new on my devices weekly, on average. Very few stay there, though, and it seems to me the apps I keep and that get the most use from are variations of those that I put there at the very beginning. For myself, I can’t say that the utility I get from my devices is drastically different than it was in 2008. I do have improved versions of things, but when I look objectively, no one has really innovated the pants off of any of this in ten years. I think the device concept was what was actually game-changing, we were essentially spot-on in assessing the iPhone as a pocket computer years ago, nothing more or less.

  8. rocwurst

    I would hope US retailers and POS vendors would get their act together eventually. You are right Australia and much of Europe is indeed far ahead of the USA in this case with NFC terminals *everywhere*. Why your retailers have only made the step to chip cards instead of jumping straight to contactless NFC cards seems very strange.

    In any case, just tapping your wrist is still vastly quicker and easier that finding your credit card in your wallet stuffed into a tight jeans pocket or hidden at the bottom of a bag.

    ps. We also have conveyor belt checkouts at supermarkets and grocery stores, but not at smaller stores like a petrol station (sorry gas station) or little kiosks which don’t even have a flat space to put your stuff.

  9. … just tapping your wrist is still vastly quicker and easier that finding your credit card in your wallet stuffed into a tight jeans pocket or hidden at the bottom of a bag.

    Yeah, but some folks don’t( or can’t due to weather and job environment – e.g. people working outside in Arizona’s summer heat often forego watches ) want to wear a watch. My own credit cards are immediately accessible in the front of my wallet and my wallet is close by because it has my government issued id too )

    We also have conveyor belt checkouts at supermarkets and grocery stores, but not at smaller stores like a petrol station (sorry gas station) or little kiosks which don’t even have a flat space to put your stuff.

    In those environments here I either pay first ( petrol station ) at the pump before I’m holding anything that I might juggle or the vendor is holding the one or two items I’m buying until I’ve paid. To me smartphone payment is to some degree a solution in search of a problem. I don’t know about Australia but here in the USA smartphones are hacked on a regular basis and I’m not willing to have any financial information on them. The NFC transactions may be secure ( and the jury is still out on that because more usage will attract criminals who try to intercept the signal ) but the phones themselves not so much. Yes, swiping isn’t secure either but while these newer methods improve some transaction facets, others are more difficult/less convenient.

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