ApplePay in Europe – Will it work?

apple pay

There is a big issue that Apple have probably faced in their negotiations with the card schemes. They probably had one of those days where they met with MC/Visa and and Apple executive said: “And this will of course apply globally?” – with an answer that introduced to Apple – Interchange rate differentials, Visa International vs Visa Europe, EMV 100% in EU and 0% in US, NFC issues on Mag-stripe vs CHIP, NFC implementation in EU, multi-currency issues with exchange rate setting issues etc.

It would seem that the 15 – 25 b.p. that have been negotiated in the US are based upon the VERY HIGH fraud rate that the US are seeing and the rinsing / growing problem faced there with the abysmal technical architecture there. The transfer of a chunk of the infrastructure onto the ApplePay architecture will create a test-bed for a new platform with a leap-frog in the technology, mankind it something that the issuers in the USA would have ‘jumped at’ in where delight, as it solves a problem that they have.

In contrast the motivation for EU issuers is not there. The EMV being 100% rolled out in most places for POS, has reduced the POS fraud to about €0/£0 – which takes away any possibility for a risk margin to be present for removal from the equation. Accordingly, and on the basis that it is a discussion between Apple and issuers on what interchange amount can be conceded to introduce this as a solution – these discussions may stall on this basis. So how will EU address this?

If we exclude the interchange concession being big enough to interest issuers to develop a process / and Apple to generate revenues, then it will need to be ‘sold’ in the EU as customer (and merchant) utility, rather than issuer savings. And we know that merchants feel overcharged, and customers not prepared to pay (in general).

OPTIONS

1. Apple to buy/create a stake in the currency-conversion part of the infrastructure

2. Apple to start thinking about disintermediating the scheme involvement in the EU (test-bed) removing transactions from the interchange regimen by negotiating the deals directly with the acquirers. This would then mean that Apple becomes a pseudo-scheme and would need to have ‘skin in the game’ in managing the risks and disputes too.

3. Apple and Schemes to enter a longer term agreement not to do 2 (above) but to enter negotiations around a part-disintermediation, with a removal of scheme elements of interchange and a bypassing of the scheme with the transactions, but then with the transactions reported into the schemes so that they can stay franchised and setting the rules (and see the transactions without taking the risk – which would now be significantly reduced.

These are of course options that would of course generate more revenues in the USA, if they adopt these there too thereafter.

I would imagine that this whole set-up is a major threat to the schemes – so I would imagine that the ‘heads of term’ agreements on the current infrastructure design includes some ‘in partnership’ / ‘will not destroy’ long term agreements between these parties for having ‘allowed’ Apple to play in this space OR some very big threats from Apple to the schemes that they would go for full-disintermediation if they did not ‘play game’.

Only time will tell, but what we do know, is that this is going to stir things up and lead to some big legal / court-room disputers in due course and all the parties here have BIG muscles and are very prepared to be aggressive in ‘defending their ground’ in the courts.

Author of this press release, Bill Trueman is Payments & Risk Specialist and director of RiskSkill a global risk review and risk management organization which is specialist in providing all risk and compliance solutions to commercial organizations.

Source: http://www.prlog.org/12374266-applepay-in-europe-will-it-work.html

 

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Pay by smartphone? Consumers Wary, Poll Says

As Apple unveiled a new service called Apple Pay that allows consumers to pay at registers using smartphones, nearly two-thirds of Americans say that way of paying does not appeal to them, according to a new survey by CreditCards.com.

Asked if they would use their phones to pay for items if they could, 44 percent of respondents said they never would, while 18 percent said “hardly ever.” Just 4 percent said they would always use phones as a method of payment, with 9 percent saying they would most of the time. The survey of 1,003 people, conducted Sept. 4-7 for CreditCards.com by Princeton Survey Research Associates International, has a margin of error of 3.6 percentage points.
Read Full Story at http://www.creditcards.com/credit-card-news/poll-consumers-wary-smartphone-payments-1271.php

UK “considering proposals” to criminalise failure to prevent economic crime

The UK government is considering whether companies should face criminal charges for failing to prevent fraud, money laundering and other economic crimes, according to the country’s chief prosecutor.

To read full story visit here.

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The FCA in London are making changes and will be starting to undertake more audits, checks and stronger enforcement upon their e-money licence-holders, passporting and passported organisations and will be looking for proper due diligence and clarity of compliance with regulations as they are now aware that there are issues in the market. How far will they go? It is unlikely that they will do a full job to ensure that everyone does as they should, and it is clear that they do not have the resource to enforce the regulations in the way that many markets – and in particular as the card-schemes do – but they must move forward as the lack of compliance is becoming somewhat dangerous.

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Recent new financial services legislation in the UK has led to the Financial Conduct Authority (FCA) introducing a Payments Systems Regulator from April 2014. The ECB, and the European Commission are also proposing ways to regulate and police the whole e-money arena, as are the international card schemes. The FCA is now also starting to review and audit the e-money licences they have granted previously and for observance with ALL regulations and also best-practices. Click to Continue

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