Whose Payments Platform is it Really?

I have been following the battle closely between Australian banks and ApplePay for quite some time. What’s really interesting to see is this battle actually 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 a number of reasons, including absence of a good payment method, weak security and internal politics within the consortium which ultimately had to satisfy needs of the varied retailers.

However, it was important to understand that the battle was driven by two primary elements:

  1. The ability to avoid typical fees (2-3%) charged by players within the card issuing, acquiring and networks
  2. Control of Data – Information about the payment is becoming just as important as payments itself; ApplePay prevented retailers from accessing that information
Mobile Payments

Mobile Payments

In terms of 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 CARD (in form of token) which is stored. ApplePay would not exist without banks issuing the cards as well as the clearing & settlement mechanism provided by the banks and networks.

There are many players in the mobile payments area, all wanting consumers to use their payments app, including:

  1. The technology giants who own the OS and device through which the payments are made
  2. The telecom providers who really missed the bus but launched their own Payment apps (remember O2 wallet in UK and Airtel money in India?)
  3. The merchants themselves – AmazonPay, Paypal (which was actually by eBay) and AliPay, even if you ignore the likes of CurrentC and other merchants launching their apps
  4. Banks launching their own private label wallets like ChasePay, CitiPay etc.
  5. Fintech Players like PayTM and Square building their own platform using the existing banking rails
  6. 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 he/she has in their bank account through a payments instrument via the clearing and settlement schemes.

So, 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.