This Verbal Confrontation Shows Why Walmart Will Never Accept Apple Pay
recode.net
recode.net
At a physical store, if you use any other mobile app, like LevelUp, then the merchant pays the higher 'card-not-present' rate. The same transaction with Apple Pay pays the lower 'card-present' rate. But an in-app purchase on an iPhone still charges the 'card-not-present' rate.
Visa's Jim McCarty's response is, "Fundamentally because the payload is different. One is a full EMV track read transaction and the other is not."
"Because it's a rule that y'all made?"
"No, because the data doesn't flow. It's why the standard was written like that." ... and then later Jim quips... "That's the first time Mike's complained about getting the card-present rate." which the moderator replies "OK, that gets the best answer beer."
The format of the packet is irrelevant. The security properties are derived from the user interaction points. Specifically, Alice loads her card into Apple Pay by taking a picture of it. A week later Alice uses her phone to pay with Apple Pay and the merchant would get a card-present rate. Can any other app do the same thing? Is there an open standard which allows LevelUp (who currently is forced to pay card-not-present) to use the same exact steps and get the same favorable rate? If not, I think Cook has a very valid point.
Apple Pay wins by default if they are the only mobile app in town which can get a card-present rate. I assume Google Wallet is card-not-present, for example. Merchants won't pay a higher rate so you can use some app. Jim McCarty specifically mentions the scale problem with changing brick & mortar merchants card-not-present rates.
Google Wallet is card-present for the merchant, but card-not-present between Google and the consumer. I guess that means Google is eating the difference between the two rates (and/or has other tricks up their sleeve).
Check with my credit union, no plans though a CC I do have elsewhere does offer it.
As far as stores, I can see the issue with being bound to the higher payment structure CC require (in or out) compared to options they are developing as a group. I am not too pleased with privacy issues of their idea but its not like I appreciate my CC's privacy issues either
(I don't love revolving credit any more than the next guy -- less, in fact; I've worked in the industry and seen its unloveliness firsthand. But you can get the benefit of a payment card without it.)
Which is not to say that there aren't shenanigans going on, but there's a reason that consumers really like MasterCard and visa, they both look after customer interests, sometimes at the expense of merchants.
IE, CC companies offer their customers consumer protection to encourage use of their product. They charge merchants when a consumer uses the product. Then, they unload the risks, costs and other burdens inherent in offering this add on service onto merchants as well. This is why they put little effort into investigating claims, making it feasible for merchants to dispute them or otherwise preventing fraudulent claims. It's has a distinct odor of oligopoly.
Oligopoly also allows for price setting. IE, the forces pushing the cost of a good or service closer to the (marginal) cost of producing it are weak. It could also be that "card present" is cheaper because in-store purchases have to compete with cash purchases. IE, they might be charging the higher fees because they can, not because they have to.
This is the reason why pretty much nobody accepts swipe cards in EU anymore - there's very few places which even have swipe terminals, it's all chip and pin. The couple times when my chip didn't work, the cashier had to key in the number of the card manually, because she didn't have a swipe terminal at the till.
I don't see how that can be true; loading a card into Apple Pay is done via photo or manually, neither of which entails a swipe of the card through something like a Square reader, which is what would be necessary for Apple Pay to provide "full EMV track read" data. The information available via Apple Pay is therefore necessarily a proper subset of that encoded into the magstripe, which, according to the Visa rep's statement, should require that Apple Pay transactions be billed under the same card-not-present fee scheme as in-app purchases and online transactions.
Your argument from packet format is irrelevant; "user interaction points" don't enter into it, under the rules defined and promulgated by the card associations. Those rules include a distinction between card-present and card-not-present transactions, made on the basis of whether or not the transaction data includes a full and valid magstripe read. Apple Pay transactions cannot include such a read, because, based on the methods by which a card can be enrolled in Apple Pay by its user, the information available at transaction time cannot be other than a proper subset of what a magstripe read would provide.
It's understandable that WalMart's Cook should be cross over this; his irritation stems from the perception that "the fix is in" between Apple and the card associations, such that they're breaking their own rules to give preferential treatment to Apple Pay.
On the other hand, these are their rules; the conditions under which various transaction fee schemes apply are defined entirely by the card associations (Visa and MasterCard, et al.), and if they want to extend preferential treatment in this fashion, then it's entirely within their scope to do so.
In effect, the rule for a card-present transaction has been extended with a clause "...or if it's done by Apple Pay". This is a special case of a more general rule under which effectively all card association operations occur, and whose most concise formulation is "Because we say so."
And how is what Walmart accepts for payment in their own stores is not under Walmart's own scope?
The whole point of "CurrentC", as I understand it, is to launch and build out a competing infrastructure which bypasses the card associations entirely, most especially their transaction fee schedules.
I can understand why merchants would want to do that; from the association perspective, there is absolutely no reason to do anything other than putting the entire cost of the transaction on the merchant, because asking the customer to pay into the scheme is a disincentive for using plastic at all -- which means that, from the merchant perspective, accepting plastic entails taking a bath on the transaction fees in exchange for not losing all the customers who won't do business at a cash-only till. Which, these days, is most of them, exclusive of special cases like a farmer's market or a flea market, where everybody expects to pay cash -- though, thanks to Square, Stripe, and friends, even that's changing.
(This, were you wondering, is the genesis both of the "credit card minimum $10" signs you see at shoestring gas stations, and the rule in the associations' merchant agreements which prohibits merchants from setting such minima. The sign comes about because transaction fees often mean a merchant loses money on very small credit card transactions, and the rule follows because merchants setting such minima costs the associations part of the fee income which they consider their due.)
It makes good sense, then, for merchants, especially big merchants like Wal-Mart who pay the associations more than anyone, to band together and try to launch a competitor to the existing scheme. Of course, it would help if they could show signs of being able to mount a serious challenge, and so far such signs are sorely lacking, which might explain some of the bitterness evident in Cook's mien on the subject.
Like it or not, though, the card associations are the 800-pound gorilla in the field; counting their predecessor organizations, they've spent over half a century establishing themselves, and to expect them to be anything other than fiercely protective of such investment would be foolish.
I'm not sure whether the people making decisions under the "MCX" banner have failed to recognize the scope of what they're trying to do, or whether they've simply failed to execute on a level sufficient to mount a credible challenge -- but, either way, they haven't done anything worth taking seriously, and I doubt they ever will. This leaves them with the same choice they've had for decades now: whether to go on paying a vig to the card associations, or instead to stop taking plastic and lose all the customers such a decision will entail. Sucks, sure, but, as ever, mere pissing and moaning changes nothing.
On a mac, neither safari nor chrome will allow me to watch the video.
The video did not play. Just black space for three minutes Neil I gave up waiting for the two minute segment to load.
Here (.se), most Visa and Mastercards are bank-issued debit cards, and almost everyone would have such a card, even if they also have a credit card from Visa/MasterCard. Is the situation the same in the US?
Also, among the types of people likely to have and use luxury-device payment systems (like brand-new iPhones), typically credit cards are coming with some type of "reward" for use -- some give "cash back" (you get refunded a certain percentage of what you spend), some give points/miles for hotels or airlines, etc., which creates another incentive to use the credit card rather than the debit card.
Maybe we also have less fraud since chip+pin is used everywhere?
You end up with a lot os scenarios where certain things get set back decades. It's hard to imagine WWW and its internet riding siblings thriving in the same way under some different paradigm. The creative zeal of the telecommunications industry is not a force I would like to rely on for progress.
Anyway, I think that most "money" industries might be like the web if it hadn't hit some lucky breaks. Financial services, ways of moving money from one place to another are incredibly clunky, bureaucratic, expensive, difficult to understand, slow, expensive and expensive. Credit cards are expensive, complicated, & oligopolistic. Bank transfers are slow and bureaucratic. It's ridiculous that heavy, stealable, physical money is cheaper to handle than electronic variants.
This is all a very straightforward example of "transaction costs," a concept at the centre of many basic and fundamental economics theories. Basically, transaction costs permeate everything in economics by reducing efficiency and limiting the velocity and cumulative volume of transactions, which are one of the few very basic elements in the economics' periodic table (say, resources, labour, technology, consumption & transactions… or something).
Many massive efforts have been made to reduce transactions costs in the form of barriers to entry or international trade. Transaction costs inherent in our financial services industry are the same sort of problem, probably even more important.
A 10, 100 or 1000X reduction in transaction costs could have a lever effect on the economy similar to the discovery of a new energy source, continent, new method of communication, better legal paradigm or some other fundamental column in an economy.
This is why I was (and still am) hoping for cryptocurrencies to succeed. Who knows where it could go.
Whatever you think of Walmart, they are obsessed with costs and efficiency. I'm not surprised this pushes their buttons. The suboptimal state of electronic payment is as bad or worse than the energy industry in the worst days of cartels.
Better to take action. Just pull their products from retailers who won't roll over. It's what Bezos would do. They could also subsidize purchases made at flagship Apple Pay partners. They have the cash for it. $1B in subsidies to happy retailers would have a punishing effect on those who decided not to play. With the thin margins in retail, that would like translate to quarterly results questions like "why aren't you taking the free money from Apple?" Or "How has turning down Apple Pay hurt your business? Company X reports a healthy jump of Y."
I found a few other articles that support the guess that the big retailers are in the middle of an all-out war with their credit card processors (e.g. http://www.csmonitor.com/Business/new-economy/2011/0413/Cred..., http://www.forbes.com/sites/danielfisher/2012/07/24/wal-mart...), so now CurrentC and the rejection of Apple Pay makes a little more sense. I didn't get it before.
If you are only making $3 for every $100, 50 cents is huge - thats nearly 15% of your profits you are paying out to CC processing.
[Apple Pay] "Tokenization removes the actual credit card number and replaces it with a randomly generated number. That number, or token, can be configured to expire after one purchase or made specific to a certain transaction, making it a useless target for hackers or fraudsters.
But what's more, tokenization removes a huge storage burden from merchants, since they never see a person's actual credit card information and it never enters their POS system or online payment portal.
Now, Apple didn't invent tokenization. But by taking the tokenization route, the Cupertino powerhouse could be looking to ride the security wave all the way to payment success, especially considering the rising number of merchant data breaches and instances of stolen credit card information that continue to hit the payment and retail industries."
Yes, merchants think that getting additional customer-identifying information that forces them to run extra analyses on the mountains of transaction data they warehouse is a huge burden they'd like to be relieved of.
</sarcasm>
Target's data http://www.usatoday.com/story/money/business/2014/03/11/targ... showed showed that customer visits, sales and profits decreased significantly following the breach. They would probably be happy to offload that nightmare onto somebody else.
In fact, even after last year's breach, Target clearly isn't happy offloading that nightmare. They're currently teting CurrentC: http://www.dispatch.com/content/stories/business/2014/11/10/...
We're talking about brick&mortar retailers, online is different since you (may) ask all this data before any payment.
If you think about it, until chip-and-pin is required in the US, there's not really more security for card-present transactions in the US. Anything they read from the card when they swipe and use to validate the transaction could be intercepted, saved, and written to another card.
So it's all arbitrary. Sometimes they ask for your zip code, so they get a better rate. Sometimes (often) they ask for the csc online, so they get a better rate. I guess the statistics work out, but from a technical security point of view, it all seems not really secure.
Indeed. I had to actually call my bank and get them to authorize my card for apple pay.
* take picture of card, enter CSC/code
* call bank (tell them a bunch of things about me to verify I am me)
* bank authorizes card for apple pay
One difference between these parameters and those provisioned to a physical ICC on a new debit/credit card, is that the card number (PAN) is not used; instead a payment token is used (it looks like a PAN - it has the same number of digits, etc). This allows Apple Pay transactions to run on the same infrastructure as chip+pin/signature transactions.