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Apple Pay may mean the end of physical bank cards within 2-3 years, argues Moven CEO

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While we’d all expected plastic bank cards to be replaced by apps eventually, the CEO of mobile banking startup Moven is suggesting that Apple’s backing could mean the end of physical bank cards within 2-3 years.

The additional sweetners here are three fold. Firstly, tokenization will avoid much of the type of breaches we’ve seen at Target and Home Depot because the token is only a one-time use thing. Secondly, the move to tokens and the combination of biometrics, etc allow for the emergence of a ‘cardholder present’ approach to interchange rates that will potentially give mobile payments a competitive merchant rate. Lastly, the US might effectively jump straight from magstripe to mobile, especially if issuers can figure out how to reduce the cost of card replacement by moving straight to mobile SE and tokens …

The U.S. has lagged behind Europe and Asia in switching from magnetic stripe cards to ones with embedded chips, for two main reasons, says Moven’s Brett King. First, uncertainty over standards, with some suggesting that Bluetooth LE/iBeacon might render NFC obsolete, leading to banks entering wait-and-see mode. Apple’s choice of NFC for Apple Pay means “that debate is over.”

Second, banks have been deterred by the cost of the switch. The cards themselves are more expensive to make, as are the more sophisticated payment terminals needed. If banks moved straight to mobile, however, the costs of EMV cards could be eliminated.

Apple Pay is supported by the iPhone 6 and iPhone 6 Plus, with the Apple Watch likely allowing mobile payment via older iPhones. Higher-end Android handsets also have NFC support, allowing them to be used for mobile payment with suitable apps.

If the idea of abandoning physical cards so quickly seems ambitious, King points out that the MINT markets – Mexico, Indonesia, Nigeria, Turkey – are already planning to move directly to mobile for new account holders, and that Apple has removed the final barrier to mature markets following suit.

For those skeptical of mobile payments adoption, POS retooling and Apple’s entry into payments signals the final hurdle to mainstream adoption […]

Apple’s entry into this space speeds up this shift, and guarantees a common standard across Visa, Mastercard and Amex networks around NFC and the use of Tokenization […]

A likely model for adoption rate for mobile payments in developed markets is 2-3 years, based on what we’ve seen around Kindle, iTunes, App and Smartphone adoption over the last 7-8 years.

Apple may have taken its time in adopting NFC, but just as it did with smartphones and tablets, the company looks set to move mobile payment into the mainstream.

The move may not be without its regulatory hurdles, however. A piece in The Hill suggests that Apple may have effectively become a bank.

By moving into the mobile payment space, Apple might soon find itself subjected to new oversight from federal regulators.

“Rules that apply to plastic card payments also apply to payments with a phone,” said Moira Vahey, a spokeswoman for the Consumer Financial Protection Bureau (CFPB).

Jason Oxman, CEO of the Electronic Transactions Association, the trade group for payment companies, said that use of Apple Pay may also create new privacy issues.

“It was never a question for regulators or legislators: ‘Are you going to be using location-based technology for your credit card,’” he said. “Because your plastic credit card doesn’t know where you are. But your phone does.”

Apple is on record as stating that Apple Pay does not store card numbers (using a separate unique number to identify the card), nor log transactions.

Via Finextra. Photo credit: AP.

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  1. Michael Superczynski - 9 years ago

    Apple Pay may just be the biggest game-changer yet from the innovators at Apple.

    • Laughing_Boy48 - 9 years ago

      Wall Street is hoping Apple Pay will fail and I’m sure Google feels the same way. I’m sure most people would be happy to unify mobile payments but just not through Apple because they don’t like the company. Apple is the best chance to make it work but all the naysayers are going to come out of the woodwork just to do their best to make Apple’s attempt unsuccessful. They had no problem with Google Wallet but Apple Pay is bringing out people to proclaim it’s the worst thing ever.

      • Michael Superczynski - 9 years ago

        That’s standard Apple-hater protocol. Nothing new.

      • airmanchairman - 9 years ago

        Regardless of Wall Street’s wishes, Google will not be allowed to implement gWallet as currently proposed; with Google’s servers able to data-mine every single financial transaction (a portion of the value chain too lucrative to be conceded to Google by Banks, Carriers or FInancial Clearing Houses), it would be only a matter of 15 – 20 years before Google completely usurped the financial services market in much the same way that Amazon has done the eBook Publishing industry.

        Apple’s implementation of a secure, swift, anonymous and empty conduit for payments is certainly more agreeable… their market strategy reveals their motives up front (sell more hardware at higher margins through added value and customer experience), and their implementation transparently reflects this.

        Apple’s acceptance of just a nominal fee per transaction ensures that the R&D cost will pay for itself, enough to give them a stronger bargaining position for a higher fee once the technology takes off, disrupts and eliminates the use of plastic completely.

  2. iSRS - 9 years ago

    I wonder if it is these types of moves that is really behind all the Apple hate in the tech bloggersphere. I mean, every argument, and now some commercials, are “Welcome to 2012” or “We’ve had this for years” – Yet nearly NO ONE is using it. (or any of the other technologies they had first). They miss the point, Apple doesn’t. Which is why Apple succeeds, and these hate filled people comment about Apple being a joke on websites.

    • Michael Superczynski - 9 years ago

      Naw, it’s just the minions who use Windows refuse to admit that the Apple eco-system is superior; always has been, always will be. That and the job losses that would occur if business and the public stopped using Windows.

    • feyip - 9 years ago

      “nearly NO ONE is using it” ?
      In the UK 22.1m contactless transactions were made in the month of May, and that’s with only 188,190 terminals accepting transactions. The fact the average transaction was about £6/7, shows they’re mainly used in coffee shops and fast food restaurants.
      But then 44.7m contactless cards have been issued in the UK alone, so the issue is not people having access to NFC payment, but shops not implementing NFC for customers to use. That’s the joke here, and one credit card issuers have been dealing with for years to combat fraud. If you went back to 2012, the US accounted for 47% of counterfeit-card fraud, yet today it still leads the developed world in use of cards with magnetic strips.
      Maybe Apple will bring this change to the US, but I’ve also yet to see anyone use Passbooks QR codes regularly to pay for things.

  3. Andrew Maloney - 9 years ago

    Can’t see this being feasable. For this to happen EVERYONE, and I mean EVERYONE needs access to ApplePay.

    This is like saying Paypal will replace all online transactions. It hasn’t happened yet and probably never will.

    • Ben Lovejoy - 9 years ago

      No, it’s saying that Apple’s adoption will lead to other NFC payment apps

      • hellokitler - 9 years ago

        Still, a lot of people don’t have compatible smartphones and still won’t in 2-3 years. Others will not want to use their phones to pay for things and will prefer to stick to more familiar methods. The idea that physical cards will be abandoned so quickly is not just ambitious, it’s daft.

      • Ben Lovejoy - 9 years ago

        I think it’s likely cards will remain as an option, but I can certainly see a possibility within 2-3 years that the default option will be mobile payment and you have to specifically request a piece of plastic.

      • Tim Jr. - 9 years ago

        Apple Pay itself doesn’t need to be on Android or WP.. It’s the token system, the security, behind it .. This is a lead by example situation basically. Apple set the bar, was able to set the standard that 3 of the major CC vendors agree on.. Thats 83% of the credit cards out there.. Thats whats big about it..

        All Mastercard, Visa, and Amex need to do is require any future Mobile pay system to adhere to the same standards and you to can have a Google Pay or Windows Pay system..

        Google for some reason stopped direct CC transactions a while back.. you have to ‘load’ your Google Wallet prior to use.. which made it a barrier for many customers that didn’t want to commit cash to a account they only use sometimes. In a way, Google shot Google Wallet in the foot when they did that.

        The second I couldn’t just load CC’s and select a default, was the minute I stopped using it.

      • Andrew Maloney - 9 years ago

        Mobile payments, or at least improved electronic payments are long overdue. This needs to go as far as your reciept automatically being sent to your cloud somehow, via email or a special purchases folder. They’ve been talking about it for years.

  4. Peter Scott - 9 years ago

    Not sure all will go away but I can certainly see the a good proportion no longer in use. Here in Australia most places have terminals with NFC and all of my cards have NFC. I tap to pay probably 90% of the time.

    Can’t wait till Apple Pay is available here!

  5. The conversion of plastic card to mobile is happening and will win out over time. Beacons, enabling geolocation rewards and other consumer “delights” will work in tandem with NFC initiated payments – the two are clearly complementary, not mutually exclusive. Apple Pay will, however, only be part of the new ecosystem.

  6. amine Bajeddi - 9 years ago

    What all the haters miss is that they had these technologies back in 2012, but never used it and the technology was never implemeted the was it should. Apple did take time to think about what should be done as usual and NFC and mobile payments will be used in iPhones more in any other phone during those past two years.

    • kobymac - 9 years ago

      No one is using this yet either. Considering the switch to chip and pin cards was flagged years ago and still hasn’t happened…this isn’t going to happen for at least a decade. The biggest sticking point was shops not upgrading their equipment – and only because of law did people bother. You really think the government is going to make it law to use nfc? Not a chance.

  7. feyip - 9 years ago

    So you go into a shop, take out your phone, and…the battery is dead!
    Physical bank cards have no power requirements and work even when wet.
    I love the prospects of increased security that payments via phone brings. And also the prospect of speeding up payments by unlocking your phone while waiting in line, rather than having to swipe and then enter a code at the till.
    Yet also remember Visa partnering O2 for an NFC app rollout – – and now I have a Visa NFC debit card in my wallet, that I can use in shops and (as of tomorrow) on all Londons transport networks, while the app is only available for advertising purposes.
    Apple said QR codes in the passbook was the future and NFC was a joke (at last years WWDC).
    NFC and iBeacon are used in shops the world over, and it’s great Apple is driving the possibilities forward. But there still needs to be a backup (you can even carry it in your phone case).

  8. Laughing_Boy48 - 9 years ago

    Some company could have come out with less expensive devices that aren’t smartphones to be able to handle mobile payments. A device with an NFC chip, a cellphone chip and a biometric scanner. A company could easily make a small device if they wanted to. The banks, credit card companies and retail merchants could have gotten together to do this.

    • airmanchairman - 9 years ago

      As indeed they will eventuallyl. However, the business at hand with Apple is to get those 800 million+ high-spending iPhone/iTunes credit and debit card holders onto the system in one fell swoop so that the outlets that they regularly shop a can embrace the technology ASAP.

      See the ease with which U2 “pushed” their now infamous new album upon every single iTunes and iPhone/iCloud service user? That’s what is making the “banks, credit card companies and retail merchants” salivate with anticipation at Apple’s entry into the payments fray.

  9. For those that preordered the Coin card, um… nope, I got nothing snarky to say, just feel bad for you honestly.

    • It was only $50, don’t feel too badly. Plus it’ll still be useful for the merchants who don’t yet accept ApplePay.

    • Ry L - 9 years ago

      I actually got a refund after the apple announcement. Haha. I only have like 2 cards anyways, so between that fact and my new iphone, I don’t think i’d have much reason to use the coin. I wish I did, I still think it’s pretty cool.

  10. Brian Hughes - 9 years ago

    I expect that ApplePay will be like iPad and the iPod before that – a complete game changer that we don’t fully understand yet. Certainly once the protocol is established, the idea of a single purpose pay device, with biometric ID built in, becomes an option for those who don’t want to be tied to a phone. However, for the rest of us, I expect that within 5 years, plastic swipe only cards will be gone, and 80% of transactions will be using some variant of this tech. The inherent security of tokenization is probably the biggest game changer. In the near term it’s launching with VISA, MasterCard and AMEX all on board. And of course, once this is in place, there is no reason phones can’t send value to each other, I’d hate to be Square right now having given up on $3Billion in cash…

    • kobymac - 9 years ago

      Theres not anything to understand. This isn’t innovation – NFC payments have been around for yonks and it’s well understood. It’s just perhaps not many people use it and maybe apple can attract more. Stop thinking this is some revolutionary thing from the future that will change lives – its old tech that saves a few seconds at best if you choose to use it…which I’m guessing, most people won’t.

  11. taoprophet420 - 9 years ago

    With US banks having to issue EMV cards next year unless they want to be be responsible for paying any fraudulent charges it will force them to invest billions in new physical cards. If laws are rewritten to to include Apple Pay for a acceptable alternative to EMV then maybe Apple Pay can make a major push. Places like Walmart and Bestbuy holding out on NFC hurts Apple. Walmart already has terminals that support EMV cards and has little motivation to switch to terminals that also have NFC.

    Apple will benefit from a rollout out of terminals that support both EMV and NFC. There will not be enough banks and retailers and governments working together to make NFC a complete replacement to physical cards within the next 2-3 years. Right now Apple Pay uses Visa’s token system and how long will MasterCard, Amex and Discover let Visa process all their transactions.

    Banks and retailers won’t simplify over night and won’t spend billions rolling out EMV cards just to quickly drop it in favor of NFC. Apple Pay And EMV rolling out at the same time in the US will reduce costs to banks and retailers by choosing point of sale terminals that include both technologies. 3 years is a pipe dream for NFC to replace physical cards.

  12. iphonery - 9 years ago

    I can see the 3 major CC company’s pushing this to the retailers just for security reasons. Credit/debit card fraud is insane!

  13. herb02135go - 9 years ago

    You’re foolish to believe this guy.

    A guy who makes a living promoting mobile banking is predicting mobile banking is the future … and you are all thinking he’s a genius.


    This is like someone who sells cigarettes telling you that cigarettes are not that bad.

    • chrisl84 - 9 years ago

      Or like a Samsung troll on an Apple site telling you Samsung is better…..

    • Ben Lovejoy - 9 years ago

      Except in this case there would be less need for the service his company offers, not more …

      • airmanchairman - 9 years ago

        Well spotted. His industry is acquiring the foresight and the nerve to disrupt themselves before they are disrupted by external advancements beyond their control.

        Be in it to win it…

      • Ben Lovejoy - 9 years ago

        Indeed: the smart guys know they have to adapt, and he is certainly one of the smart guys.

  14. Dizzy Dame - 9 years ago

    first comment on 9to5mac, but long time reader :) any way, what about bitcoin? it is not mainstream but a lot of people are into bitcoins, and quite a few retailers are accepting bitcoins as payment.. the sacramento kings, for one, accept bitcoins as payment, some real estate sellers accept bitcoins as payment too.. maybe someday, bitcoin payments can be integrated into the apple pay.. its just an intriguing thought

  15. Next stop : airlines, air tickets, licitations, apple maps with airlines etc. Add some rails while at it.

  16. Bryan Hough - 9 years ago

    I’ve been using Google Wallet for YEARS. I just fail to understand what is so fundamentally different and groundbreaking about “Apple Pay”. Its just another BS term that Apple made up. It can join the likes of “retina display” in the book of fabricated terms that Apple made up for things that Android already does.

    • parrotcam (@clonewar2) - 9 years ago

      how many people do u see use google wallet? has google popularize NFC use? plenty of android devices have NFC or mobile payment but it is inconvenient to use.

    • parrotcam (@clonewar2) - 9 years ago

      if Apple popularizes NFC and makes it mainstream, Google and all the rest of the Android Swine will start copying Apple’s NFC system. watch samsung, LG and HTC copy what Apple does with NFC.

    • Ry L - 9 years ago

      Correct me if I’m wrong, but Google Wallet doesn’t use a token system the way Apple Pay will. Also, don’t you have to load money onto a specific Google account to use it? Then there’s the Touch ID thing. Oh, and not storing any card or transaction info. I doubt Google could resist not looking at transaction info (ads, yo).
      I’ve never seen/used Google Wallet up close, so I’m not sure on all of these. Still, with Apple Pay coming out, it should help you use your Google Wallet even more, so you can still be happy about that :)

    • charilaosmulder - 9 years ago

      I understand the confusion. For starters, NFC is just a wireless technique, not a complete payment system. The way Apple handles payments is totally different, in a good way. Here’s an article I found that lets you easily understand the difference:

  17. Pierre Calixte - 9 years ago

    I think people will always keep their cards in their wallet. The actually use, as in physical swipes, of plastic on the other hand will certainly plummet.

  18. parrotcam (@clonewar2) - 9 years ago

    if apple does start a trend in people using NFC, I think Android/Google could once again take over the entire market by copying their strategy. I dont know how much apple could benefit if Android completely takes over the payment market. they already control 80% of the market and it wouldn’t surprise me if everything that apple sets up for iphone 6 could easily work on android too.

    • Ben Lovejoy - 9 years ago

      Don’t be misled by raw numbers – many of those Android devices are low-end ones. Apple – and merchants – are interested in where the money is.

  19. Taste_of_Apple - 9 years ago

    I can definitely see this happening. They took they’re time and did it better than anything or anyone else has done.


Avatar for Ben Lovejoy Ben Lovejoy

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!

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