Apple Archives - Finovate

Four Reasons Why Goldman Sachs and Apple Are Breaking Up

By David Penn Posted on August 2, 2023
Categories: Apple, List series, Thought Leadership

Rumors have circulated that the partnership between one of the biggest names in finance – Goldman Sachs – and one of the biggest names in tech – Apple – is coming to an end.

Specifically, the reports suggest that Goldman Sachs is looking to exit its financial relationship with Apple. Goldman Sachs is Apple’s partner for its Apple Card – and has been since 2019. Goldman Sachs is also Apple’s partner for its Buy Now Pay Later service, currently in beta. Reports from the Wall Street Journal indicate that Goldman Sachs is looking to off-load its Apple credit card business to American Express.

So why has the relationship soured? Here are four possible factors:

Know Your Customer

One of the big headline issues hinting at friction between Goldman Sachs and Apple occurred when Apple CEO Tim Cook was testing the Apple Card and was unable to get approved. The issue had to do with fraud protection protocols on Goldman Sachs’ side. The company’s underwriters rejected the application because, as a well-known, high-profile individual, Tim Cook is often impersonated by fraudsters. This appeared to be a one-off problem at first. But an investigation by the U.S. Consumer Financial Protection Bureau led to additional concerns about disputed transactions and, ultimately, reports of gender bias in the granting of credit limit increases. Goldman Sachs was cleared of any wrongdoing, but the drama helped stoke tensions between the company and Apple.

Culture Clash

It’s not surprising that there were issues between the East Coast Wall Street culture of Goldman Sachs and the West Coast Silicon Valley culture of Apple. But there were very real challenges in the working relationship between the two firms. As is often the case when “move fast and break things” technologists team up with the rules-based world of finance, there was a tension between what one person called a focus on “the sleek technology and product pizazz” on the one hand and “regulatory compliance and profitability” on the other. Even at a more mundane level, basic issues such as the timing of billing statements and card design became grist for conflict and development delays.

The Bank Behind the Curtain

Writing at 9to5 Mac, Chance Miller noted that in addition to losing a ton of money with Apple Card – more than $1 billion by January 2022 – there are other ways that Goldman Sachs was losing out on the Apple partnership. Miller points out that not only was Apple developing its own in-house financial service project (called “Project Breakout”), but also there were other aspects of the relationship that ill-served Goldman Sachs. “One thing to keep in mind is that most Apple Card users likely don’t even know Apple Card is backed by Goldman Sachs,” Miller wrote. “Goldman Sachs exists in the backend, and everything else is managed directly through the Apple Wallet app.”

While this relationship is common in fintech and financial services, it seems like a poor approach for Goldman Sachs, which is newer to the consumer business than Chase or American Express and was likely seeking to build its consumer brand via its association with Apple. Couple that issue with the financial losses, and the potential of Apple “breaking out” on its own, and Goldman Sachs may have one more reason to start second-guessing its Apple Card gambit.

Whose Idea Was This Anyway?

When Goldman Sachs first announced its partnership with Apple, there were many who questioned the financial institution’s deepening foray into consumer banking. Goldman Sachs earned its lofty reputation in the world of finance as a leading investment bank and investment management firm. To say that consumer banking was not a core Goldman Sachs competency would be an understatement. But in the wake of the financial crisis, with Wall Street banks desperate for new revenue sources, consumer banking and the rise of fintech were alluring opportunities to an institution like Goldman Sachs. Goldman Sachs had room to grow – and money to burn. The firm also had a brand name and reputation that would help it gain the attention it would need in an increasingly competitive market.

But projects like Marcus rose and plateaued, with an initial rush of deposits leading to overly optimistic profit forecasts and, ultimately, significant losses. Efforts to expand into areas such as investing via Marcus revealed that Goldman Sachs was not as innovative as smaller upstarts like Robinhood. An attempt to leverage opportunities in consumer lending with the acquisition of Buy Now Pay Later startup GreenSky proved costly.

Seen through this lens, Goldman Sachs’s issues with Apple Card may have more to do with Goldman Sach’s issues with consumer banking.

Photo by cottonbro studio

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Beyond Crypto Curious: How Apple, Mastercard, and Revolut Are Embracing Digital Assets

By David Penn Posted on November 10, 2021
Categories: Apple, List series, MasterCard, Revolut

Three headlines in the cryptocurrency space this week show how seriously Big Tech, Big Fintech, and the world’s largest financial services companies are taking the rise of digital assets. And while each of the three companies listed below varies in the degree to which it is embracing our increasingly crypto-friendly future, their continued interest in the space suggests that the pace of adoption of digital assets – and the proliferation of use cases – is only likely to grow in the months and years to come.

Are Cryptocurrencies Coming to ApplePay? – AppleInsider reported early this week that Apple is considering integrating cryptocurrencies into its Apple Pay solution.

The report is based largely on an interview that Apple CEO Tim Cook had with Aaron Ross Sorkin as part of the DealBook Online Summit sponsored by The New York Times. That said, those looking for a firm commitment from Apple in Cook’s conversation with Sorkin will be disappointed; while Cook expressed interest in cryptocurrencies from a “personal point of view … for awhile” and admitted that he believed that it was “reasonable to own (cryptocurrencies) as part of a diversified portfolio,” the idea of Apple accepting cryptocurrencies as payment for Apple products and services remains just that – an idea. Cook also expressed skepticism toward the notion of Apple investing in cryptocurrencies as part of a corporate investment strategy.

Apple’s relationship with cryptocurrencies has been cautious, to say the least. Back in 2014, Apple removed a number of Bitcoin wallets from its App Store, including one trading and storage app with 120,000 users, and another wallet app from Coinbase. More recently, there has been some softening of Apple’s stance, with Apple Pay VP Jennifer Bailey conceding the the company is “watching” the space and sees “interesting long-term potential” in digital currencies just a few years ago.

It’s worth noting that Apple’s reputation in technology is less as a first-mover and more that of a technology enhancer that often comes along and does a better job at innovations initiated by others. So the idea that Apple’s approach to embracing cryptocurrencies would be similarly slow-rolling is consistent with how the company has long operated. Nevertheless, Apple Pay’s fintech rivals – such as PayPal, Square, and Stripe – have been far more eager to pursue opportunities in crypto. Add to this the fact that Google Pay has teamed up with digital asset marketplace Bakkt in a deal that will enable users to spend Bakkt Card crypto funds directly from their Google Pay accounts. Together, it seems much more likely that a closer relationship between cryptocurrencies and Apple Pay is a question of “when” rather than “if.” As interest in digital currencies accelerate, and the solutions and services from these crypto-friendly fintechs become more widespread and even mainstream, it is hard to imagine Apple Pay remaining on the sidelines.

Revolut Takes Steps Toward Building a Cryptocurrency Exchange – The rumor that aspiring super app Revolut is looking to build a cryptocurrency exchange hinges largely on a job posting at LinkedIn. According to reports, Revolut wants to hire an individual with at least seven years experience in technology and in building order matching engines to lead a technical team to “architect and built Revolut Crypto Exchange.”

The crypto exchange would further establish Revolut as a leading player in the cryptocurrency space and potentially enable the company to diversify its services and create new cash flow, which could help Revolut establish another reliable revenue source going forward. The exchange news also follows reports that Revolut was looking into launching its own crypto token. And while Revolut has not commented on what it has referred to as a “mere rumor”, the report, first shared by Coindesk earlier this fall, does bolster the notion that Revolut is deepening its commitment to digital assets – a space the company has enjoined aggressively since introducing in-app cryptocurrency trading functionality in 2018.

In April of this year, Revolut added 11 new crypto tokens to its platform. The following month, the company launched its public beta for Bitcoin withdrawals. “I said before that 2021 would be the year of crypto and Revolut is here to deliver on that promise,” company Head of Crypto Edward Cooper announced in June when the company revealed that it would add Dogecoin to its current cryptocurrencies offerings for traders. “One of the most popular user requests over the past couple of months has been to add Dogecoin and we have answered the call!”

Revolut has more than 16 million customers around the world, and conducts more than 150 million transactions a month on its platform.

Mastercard Introduces Crypto-Linked Cards for the APAC Region – Also this week, Mastercard announced that it has secured partnerships with a trio of cryptocurrency companies – Amber, Bitkum, and Coinjar – who will issue crypto-funded Mastercard payment cards. The collaboration represents the first APAC-based cryptocurrency service providers (Amber and Bitkum are based in Thailand, Coinjar is headquartered in Australia) to join Mastercard’s Crypto Card Program, an initiative designed to enable companies to offer secure payment cards that meet regulatory requirements with regards to cryptocurrencies.

“Cryptocurrencies are many things to people – an investment, a disruptive technology, or a unique financial tool,” Mastercard EVP for Digital and Emerging Partnerships and New Payment Flows in the Asia Pacific region Rama Sridhar said. “As interest and attention surges from all quarters, their real-world applications are now emerging beyond the speculative. In collaboration with these partners that adhere to the same core principles that Mastercard does – that any digital currency must offer stability, regulatory compliance, and consumer protection – Mastercard is expanding what’s possible with cryptocurrencies to give people even greater choice and flexibility in how they pay.”

Mastercard’s APAC announcement comes on the heels of news that the company will enable the banks and merchants on its payment network to integrate cryptocurrency offerings into their products. The new arrangement comes courtesy of a partnership with Bakkt and will empower bitcoin wallet providers as well as issuers of credit and debit cards that offer rewards in crypto and enable digital assets to be spent. Also benefitting from Mastercard’s plan are those companies that offer loyalty programs that allow points from travel or hotel stays to be converted in to cryptocurrencies.

“Mastercard is committed to offering a wide range of payment solutions that deliver more choice, value, and impact every day,” Mastercard EVP for Digital Partnerships Sherri Haymond said. “Together with Bakkt and grounded by our principled approach to innovation, we’ll not only empower our partners to offer a dynamic mix of digital assets options, but also deliver differentiated and relevant consumer experiences.”

Photo by RODNAE Productions from Pexels

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Is Apple Joining the Buy Now Pay Later Revolution?

By David Penn Posted on July 13, 2021
Categories: Apple, Daily news

If you had “Apple” on your bingo card as the next Big Tech company to edge its way deeper into fintech territory, congratulations! Bloomberg News reported this week that Apple’s Apple Pay solution will gain Buy Now Pay Later (BNPL) functionality – enabling consumers using Apple Pay to pay for purchases in interest-free installments.

The new service will leverage Apple’s partnership with Goldman Sachs – Apple’s credit card partner since 2019 – to facilitate what will reportedly be called Apple Pay Later. And while it is clear that Apple is taking advantage of one of the hottest retail trends in years, it is worth noting that Apple has ventured into installment payment territory before. Apple consumers can use their Apple Card to buy designated products in the Apple store and pay via monthly, no-interest payments. Apple cardholders also have been able to buy iPhones in 24 monthly installments with zero interest since shortly after the cards were launched in August of 2019.

According to Bloomberg, when users make purchases on their Apple device using Apple Pay, the service will enable users to pay either with four, interest-free payments made every two weeks, or over several months with interest charged. Neither Goldman Sachs nor Apple have responded to the Bloomberg report.

Fueled by powerful technology trends making online and mobile commerce easier for a new generation of consumers – as well as a low-interest rate economy – Buy Now Pay Later has grown to account for more than 2% of all ecommerce transactions around the world, according to a report from Worldpay. This growth is expected to accelerate by as much as 2x by 2024. In the United States, $20 billion worth of e-commerce transactions in 2019 used BNPL payment structures.

How will Apple’s arrival as a Buy Now Pay Later competitor impact the rest of the field of Klarna, Affirm, Splitit, Afterpay, Sezzle, and so many others? Is there enough room for growth in the BNPL market for multiple players to succeed before competition between them starts to intensify? For now, it is traditional credit card companies that have the most to lose from the rise of BNPL, as Millennials who came of age during the Great Recession continue to shun interest-charging payment methods, and Generation Z consumers grow up in a world in which Buy Now Pay Later options are not just available, but increasingly commonplace.

Photo by cottonbro from Pexels

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Mobile Monday: Helping Customers Understand EMV & Mobil Payments

By Jim Bruene Posted on September 28, 2015
Categories: Apple, Capital One, Mobile Payments, Service

This week’s EMV “liability shift” in the United States is expected to be a boon for mobile payments. We are undergoing a massive expansion in number of NFC-enabled terminals, at a time when Apple and Android Pay are not only measurably faster than the more time-consuming “chip dip”, but also more secure. That’s a HUGE change in the “relative UX” between the two options.

Savvy issuers should seize on the negative publicity and confusion around EMV plastic cards and push NFC options, both within the native app and on desktop and mobile websites.

But from what I saw today during a tour of several dozen major bank and credit union mobile sites (using iPhone 6), very little is discussed about this change. In fact, none of the 25 largest banks address it on their mobile homepages. I finally found one mid-sized credit union that addressed EMV (First Tech Federal Credit Union) and another that mentioned Apple Pay, albeit a few screens down (Stanford Federal Credit Union), but neither of them addressed both issues (see screenshots below). Both CUs have responsive homepages, so the messaging was the same on both the desktop and mobile web.

Most issuers address basic EMV questions when sending new chip-cards to customers. But I’m guessing that:

number of cardholders who read the EMV instructions
x
the number that understood it
x
the number that remember it
=
zero

This is a good opportunity to get your cardholders on board with Apple Pay and Android Pay. And don’t forgot to help them understand how to make your card the default in the Apple Wallet (previously called Passbook). Refer to Capital One’s email explanation sent to cardholders after adding their card (screenshot below).

———–

Mobile website homepages from Stanford Federal Credit Union (left) and First Tech FCU (right)
As seen on iPhone 6 at noon, 28 Sep 2015

———-

Capital One email sent to cardholder minutes after adding card to Apple Pay and authorizing through Capital One mobile app (28 Sep 2015)

——–

We will be addressing issues in EMV, mobile payments, and much more at Finovate’s second annual developers’ event, FinDEVr, 6/7 October in San Francisco.

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Help, My Apple Pay is Not Working

By Jim Bruene Posted on August 12, 2015
Categories: Apple, Bank of America, Credit/Debit Cards, Mobile Payments, Service

The last few times I’ve tried to use Apple Pay, it’s not worked. And when that happens at the POS, you pretty much look like an idiot waving your fancy phone around and smacking it against the terminal (as if that would help). So yeah, I’m that guy holding up the line, although in my defense, not nearly as long as that person that still uses paper checks.

When Apple Pay is on the fritz, besides my looking like a fool, I’m at a bit of a loss as to what to do next. I tweeted this today:

My #ApplePay isn’t working How best to resolve? A. Google it? B. Call bank? C. Email Apple? D. Use mag stripe? It’s D for me

— Jim Bruene (@netbanker) August 12, 2015

While it may appear snarky, it’s a serious question. When Apple Pay doesn’t work, there is no clear path to resolution. So here is what happened when I tried the various methods in my tweet.

A. Google it

At first glance, there seems to be promising results, including Apple Support. But alas, its FAQ makes no mention of it “not working,” but it does offer a way to get through the help topics and to an online/phone support area (see C below). And while there is much discussion on the Apple forums, the best advice was to “reboot” your phone, which is surprisingly effective for many.

Grade: Incomplete. While I was able to find Apple support within a few minutes, I had to go to the chatbot for a full diagnosis (see B below)

B. Contact Apple

During my Google search, I stumbled into the correct area to get to Apple Care support (see A above). While I had to go through a few screens in the self-service area, it took only about 30 seconds to get to the one that offered a choice of online chat, call center (with 2-minute estimated wait time), or alternatively, I could schedule a call (see inset).

As always, I chose online chat. The chatbot was good (not sure if/when a human stepped in), but it took a full 13 minutes to diagnose the problem (including looking up my serial number at the outset). Apple suggested I delete the existing payment card and add the new one, which was the right answer.

If you try to figure out the problem directly on your phone, a search for “Apple Pay” within the phone, i.e., Spotlight Search, directs users to the Passbook app. If you select the “i” button for more information, you are directed to the bank’s call center (see C below). Alternatively, you can navigate directly to Settings, find Passbook & Apple Pay (below the fold), and locate the bank contact number.

Grade: C >> for the 13 minutes it took through Apple Care chat support

C. Call the bank (BofA)

I had just a single card, issued by Bank of America, hooked to Apple Pay. Although I try to avoid call centers if at all possible, I have been very pleased with BofA call center support in the past, so I called the number on the back. And while SIRI, or whatever their voice recognition is called, was not able to understand Apple Pay questions (“I hear that you want to make a payment, is that right?”) I had passed authentication and was put through to a live operator in about 3 minutes. I’d already figured out the problem during my 13 minutes with Apple Care (old card number), so I didn’t torture BofA and play dumb. But had I not known the answer already, the CSR was prepared to get Apple Pay support on the line for help.

Grade: B- >> for being able to get to Apple Pay phone support within 4 to 5 minutes (though did not test their diagnostic skills)

D. Use the mag stripe

Honestly, if I wasn’t into this stuff for my job, I would have just started using the mag-strip card and forgot about Apple Pay until v2.0.

Grade: A >> for the 5 to 7 seconds it took to get the plastic out of my wallet, swipe, and stop holding up the line

———-

The fix

As mentioned in B above, my Apple Pay problem could be solved either through the Passbook app itself or through the Passbook settings within the iPhone Settings area.

Here’s what I saw when clicking on my “card” in Passbook (see inset).

And that was the reason why Apple Pay had stopped functioning. Bank of America had revoked my card a few months prior during a breach-related reissue.

But I’m not sure how I was supposed to know that I needed to update my Apple Pay card. I’ve searched my email from Bank of America, but I see no message from them on the subject. While it could have been trapped by the SPAM filters, that would be unusual for messages from my card issuer.

It’s completely understandable why the bank would pull my card out of Apple Pay if it was cancelled and replaced by a new number. But they either need to inform me, along with good instructions on what to do next, or better, simply replace my old card with the new one within Apple Pay, with notification of course (see update below).

But that’s probably v2.0 customer support. Until then, I’m glad there’s still a mag-stripe as backup.

—–

Update 19 Aug 2015: Apparently, Citibank is automatically replacing new card numbers into Apple Pay when the old one is canceled. Not sure if this applies to its entire portfolio or selected customers. Thanks to Ian Kar for the pointer.

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Apple Pay Works (Duh), But it’s No Starbucks (Yet)

By Jim Bruene Posted on October 21, 2014
Categories: Apple, Mobile Payments

Well, that was anticlimactic. But I knew it would be.

Between Starbucks mobile, Square Wallet, Google Wallet and my Discover Card contactless sticker affixed to the back, I’ve made a few hundred in-store purchases with my phone.

So smartphone purchase #247 today was hardly remarkable from a UX standpoint. The only thing that would have made my first Apple Pay experience interesting would have been if it failed (resulting in a much more clickable headline for this post). But although it took three tries (note 1), the phone finally vibrated (the same as my Nexus) telling me that Apple’s NFC magic had indeed triumphed (note 2) adding 1.05 cent to its Q4 numbers (note 3).

And although I firmly believe we are at “peak plastic” for debit/credit cards and payment via the cloud is inevitable, I don’t see how Apple Pay adds 15 BPS (or a half-cent for debit) of value to the card-using experience. But to play with Apple you have to pay. And 15 BPS is a lot better than the 30% interchange Apple has collected for the past six years on in-app purchases. So I’m neither criticizing the rumored economics, nor the 500 issuers who have signed on. For competitive reasons, you might as well play along (or not, see previous post).

Bottom line: I’m not giving up on plastic, or merchant-specific apps like Starbucks (or MCX?), quite yet. The iPhone/TouchID experience is great, but at this point, it’s slightly more cumbersome than plastic (note 4) and costs more if you account for my tendency to drop the phone (note 5).

And Apple Pay’s consumer value for in-store purchases will come in the future with more integration between phone, bank and merchant (note 6). Getting customers to give up plastic is all about the three R’s: rewards, receipts, and relationships (note 7). Starbucks has nailed it (note 8). Apple has not, yet.

———————–

Screenshots

My first Apple Pay in-person transaction
Left: Push notification on top of homescreen
Right: How it looks within the Apple Passbook app

————————

Notes:
1. The first time I put the phone next to a terminal, nothing happened when I authenticated with TouchID. I’m not sure if it was my phone’s failure or the cashier failed to ready the charge properly. The second time, it did connect, but I was declined with a negative “buzz” from the phone. The cashier readied the charge a third time and this one went through with a pleasant vibration and push notification on the screen. These things happen, even when swiping plastic, so I don’t hold it against Apple Pay. That said, were I a so-called normal consumer, I probably would have pulled out my plastic and waited for Apple Pay 2.0 next year before trying again.

2. Sadly, I still had to make chicken scratches (aka my signature) on the Verifone display at Bartell Drug for the $6.99 box of tea and also have a paper receipt shoved into my hands. It’s not Apple’s fault, but it does detract from the overall UX.

3. My $6.99 purchase times the rumored 0.15% interchange rebate to Apple.

4. I’ve been using TouchID only a month, but so far, I find it clumsy. I have three fingerprints registered, and some work better than others, and overall, I find it can take numerous attempts to get it to authenticate. This is not something I want to experience at the front of the checkout queue. It’s bad enough that I’m standing there waving my new $600 gold smartphone at the terminal. I don’t need to be holding up the line while I fumble with said device. Once the novelty wears off, I’ll probably go back to swiping plastic, at least if there’s a queue.

5. In addition, every time I pull my phone out, especially when juggling purchases at the point of sale, there is a chance I’ll drop it. And since I detest cases, I crack my screen every year or two. Assuming it costs $100 to fix, and I crack it once every 5 to 10,000 times I handle it, it’s cost me 1 or 2 cents to use my phone in lieu of plastic.

6. This post is about the physical point of sale. The one-click mobile-payment process for Apple Pay-powered shopping carts and apps has immediate and understandable value for both the consumer and merchant.

7. You could argue that the increased security from phone payments will move people off plastic. But consumers still do not trust mobile phone security, for good reason. And they know they are covered for plastic security breaches. So the known threat (plastic) probably trumps the unknown (phone) for the time being.

8. And the Starbucks experience gets better next year when “order ahead” goes national.

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Banks Gear Up (or not) for Upcoming Apple Pay Release

By Jim Bruene Posted on October 14, 2014
Categories: Apple, Mobile Payments

If all goes well, some time within the next week Apple Pay will be up and running. Short-term it won’t cause a ripple in market share or consumer behavior (see previous post), but long-term it is likely to be seen as an important mobile-payments milestone.

Regardless, I look forward to using it. But with only a couple contactless terminals in my usual Seattle haunts, I guess I’ll be buying lots of coffee at Peet’s and Tully’s while I test it.

But I digress.

The subject for today is what banks are and aren’t doing to ride on Apple’s mobile coattails. There has been little FI marketing so far, other than PayPal’s NY Times full-pager poking fun at it (15 Sep 2014, see inset). And some media buys from Visa and MasterCard.

Eleven financial institutions were named on 9 Sep 2014 at the official launch of Apple Pay: Six major launch partners listed below and five “coming soon” issuers (see note 1).

The big six have been almost silent since the first week when four of the six issued press releases, emailed customers (note 2) and/or posted promos on their websites.

Issuers may now be gearing up their marketing machines, which were caught relatively unaware last month, due to Apple-prescribed secrecy, for a pre-holiday Apple Pay push. However, I would not be surprised if major issuers, who’ve already seen contactless card-usage fizzle, take a wait-and-see approach for the remainder of 2014.

In any event, it will be interesting to watch.

_________________________________

Apple Pay FI launch partner marketing to date
_________________________________

American Express
   Press release: No
   Email: None reported
   Website promotion: None reported
   Website site search: Nothing listed

Bank of America
   Press release: No
   Email: One reported by The Financial Brand (link) though I did not receive it
   Website promotion: Nothing now, but promo reported at launch by Jim Marous in The Financial Brand
   Website site search: Links to landing page (link)

Capital One
   Press release: link
   Email: One sent to my consumer account (12 Sep 2014)
   Website promotion: None reported
   Website site search: Nothing

Chase
   Press release: Quoted in Apple’s official release (link)
   Email: One reported by MediaLogic (link) though I did not receive it
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand
   Website site search: Nothing

Citibank
   Press release: link
   Email: None reported
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand
   Website site search: Nothing

Wells Fargo
   Press release: link
   Email: Two sent to my consumer account (11 Sep and 19 Sep 2014)
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand

Website site search: Nothing

______________________________

Second wave issuers
______________________________

Perhaps because they are smaller and must try harder, three of the six next-wave Apple Pay issuers (note 1) have promos running on their websites today:

Barclaycard homepage (one of three promos in rotation)

PNC Bank homepage (in lower left corner)

US Bank homepage (one of three promos in rotation)

———————

Notes:
1. The five other issuers mentioned at the Apple launch were: Barclays, Navy Federal Credit Union, PNC, US Bank, USAA. Yesterday, Arvest Bank announced it was supporting the system as well.
2. Despite having 10 card accounts (four business and six personal) across the six launch partners, I have received emails only from two (Wells Fargo on 11 & 19 Sep 2014 and Capital One on 12 Sep 2014).

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Why (Most) Banks Need Not Worry About Apple Pay (Yet)

By Jim Bruene Posted on September 15, 2014
Categories: Apple, Chase Bank, Credit/Debit Cards, Mobile Payments, Strategic Planning

I’ll admit to being caught up in the hype. The 48 hours after Tim Cook revealed Apple’s long-rumored foray into payments were some of the most exciting times in fintech since the 1995 to 1997 period when most of the online “firsts” happened (see note 1).

And we’re seeing more thoughtful fintech posts in the past week than we used to see in an entire year. Thanks especially to Tom Noyes, Cherian Abraham, Brian Roemmele, Celent’s Zilvinas Bareisis and finally today from Gonzo’s Steve Williams for helping me see beyond the hype.

I can add little that hasn’t already been said to the discussion about NFC, payment ecosystems, or the future of mobile payments. Clearly, it marks a turning point for mobile payments and improved U.S. security, and the play-out will be fun to watch.

The one area I haven’t seen covered: What does all this mean for the 10,000 U.S. banks and credit unions not on the 11-name list at launch (note 2)?

So here’s my take on the impact of Apple Pay on small- and medium-sized FIs over various time horizons:

In the short term (2014): ZERO

In the medium term (2015-2016): ZERO

In the long run (2017+): Something, but impossible to quantify at this point
(it could even be net positive)

Here’s why bank/CU execs (outside the top-20 credit-card issuers) should not lose sleep over what Apple is doing:

1. Apple Pay (in the physical world) can be used only at contactless terminals
Supposedly, there are 220,000 contactless terminals in the United States. But if you’ve ever tried to use one, you know that 200,000 of them are either not working or are buried behind beef jerky on the counter. This will change rapidly as merchants upgrade during the next few years.

2. It’s complicated to use (at first)
First, you need an iPhone 6, then you need to figure out how to use Apple’s Passbook program, log in to iTunes or take a picture of your card, successfully authorize it, enable TouchID and so on. Millions of early adopters will figure all that out, but then they won’t be able to find a working contactless terminal (see #1) and then they’ll forget all about it.

3. The number of your customers that care enough to move deposit accounts for NFC payments is near zero (for now)
Let’s do the math. Assume that a year from now there are 5 million Apple Pay active users (making at least one transaction per week) or 2.5% of U.S adults. If you have 20,000 customers, that means 500 will be active users of Apple Pay. Most will be happy to use their existing Capital One, Citi, and other rewards credit cards for the transactions. Very few will care that your debit card doesn’t work on the system. Let’s say it’s around 25%. That means you have something like 125 customers who are disappointed with your mobile payment capabilities. If they like you otherwise, how many will move their checking account to get an Apple Pay-enabled version? While the number is probably zero, let’s say it’s 5% to 10%. That means you could lose 6 to 12 customers. Using the 80/20 rule, only one or two of them are profitable. Will it hurt to lose two profitable customers? Sure, but it’s not going to be on your top-10 or top-25 list of worries.

4. There are ways to mitigate any lost wallet share to Apple-Pay issuers
Even if my math in #3 is way off, or you are concerned that you will take a material hit to the bottom line, or you just want to be part of Apple Pay, easy routes will undoubtably be built to get your cards enabled into Apple Pay. Maybe not in 2014 (or even 2015), but certainly within the next couple years. And even if I’m wrong and you are locked out of the iPhone indefinitely, you can create an Apple Pay poaching program where your customers make their charges on a bigco bank card, then you automatically pay those charges off and essentially transfer them to your customer’s checking account.

So my final advice. If you have an employer (or spouse) that’s been reluctant to fund your iThings, now is the perfect time to do an upgrade (just don’t show them this post).

——————-

Chase homepage shown to existing customers (15 Sep 2014)
Note: All three links on bottom of page go to the iPhone6 “Apple Pay” features page at Apple.com which leads with Chase (link)

——————————–

Notes:
1. Or perhaps 1999 when Paypal/X.com made P2P payments happen or even 2005/2006 when Zopa/Prosper/LendingClub launched consumer credit exchanges.
2. See Apple Pay launch event clip here, complete with transcript.

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Apple Touches Off First Wave of Mobile Banking Biometrics

By Jim Bruene Posted on June 4, 2014
Categories: Apple, Citibank, Mobile Banking, Security & Privacy

We’ve known this day was coming ever since Apple acquired AuthenTec two years ago for $350 million. That was real money back in the pre-Beats/Nest/Oculus days.

Monday, Apple made it official at its annual developers’ conference: The fingerprint authentication system built into the iPhone 5S (Touch ID) will open to outside developers in the next iOS update (v8.0 expected in mid-September). That means that app publishers, including banks, credit unions & wallet providers, will be able to use it to provide initial authorization into a secure app.

The new feature was demonstrated on stage by logging in to Mint (see inset, screen cap tweeted by Bradley Leimer Monday). In the demo, Mint users are prompted to use the touchpad to open the app (the small type says, “Please authenticate in order to proceed”). Users are also given a password option.

Most likely, banks will use Touch ID, as well as other handset-resident biometric systems (note 1) to deliver “read-only” access to data. It’s an approach that’s been catching on around the world even before Apple’s biometric wizardry. Citibank is the most recent to provide a no-login glimpse in its mobile app (called SnapShot), rolling it out nationwide two weeks ago (press release). It’s also used at Westpac (NZ), Commonwealth (AU), Bank of the West, City Bank of Texas and many more (note 2).

For anything transactional, such as a wire transfer, banks will likely require additional authentication (see our Nine Circles of Security).

And of course, these security changes will generally need to be optional for customers until they become commonly accepted practices. Most users are still extremely wary of security on mobile phones, even though it is a marked improvement over the desktop (note 3).

While it’s too early to know if any financial institutions will have it enabled by September, one fintech payment provider, CardFlight, wasted no time, announcing support for Touch ID just a few hours after the Apple keynote (note 4).

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Notes:
1. Celent’s Jacob Jegher showed me his facial recognition login on his Android phone (Samsung?) at last month’s FinovateSpring. Very cool, though he doesn’t have it enabled since it slows up the login process just slightly.
2. Malauzai Software powers more than 90 credit unions and banks alone (post).
3. See our latest report on Mobile Security (March 2014, subscription) for more info.
4. Cardflight will be showing off its latest tools at our first developer event, FinDEVr, 30 Sep 2014, in San Francisco.

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Mobile Monday: Top 50 iPhone and iPad Apps in the Finance Category

By Jim Bruene Posted on January 7, 2013
Categories: Apple, iPad, iPhone, Metrics, Mobile Banking, Mobile Payments

I knocked around Apple App Store last week researching our year-end Online Banking Report. Below are the current top free finance apps in the U.S. store (note 1). While there are not a whole lot of surprises, several are notable:

Credit Karma maintains its top-10 ranking (#9)
Intuit has three of the top-10 apps (#4, 6, 8) plus #30
Two of the top-5 financial institution iPhone app providers (PayPal and Capital One) do not yet have iPad apps
Three credit-monitoring apps are in the top 32 (Credit Karma #9, Intersections #23 and Experian #32)
Two banks each have two apps in the top 50: Capital One (#6 and #34) and PNC (#25 and #42)
Five fintech startups made the top 22 (Credit Karma #9, LearnVest #15, Lemon #19, Pageonce #20, Manilla #22); all but Lemon are Finovate alums (note 2)

Methodology: I first listed the top 50 iPhone apps from the “Free Finance” category (column 2). Then I went to the iPad store and found their corresponding iPad app rank (column 3). I then listed all the remaining iPad apps in the top 50 and their corresponding iPhone rank (last 20 rows below).

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Top iPhone/iPad Finance Apps in Apple App Store (USA)

Company	iPhone Rank	iPad Rank
PayPal	1	none
Chase	2	3
Bank of America	3	1
Mint (Intuit)	4	5
Wells Fargo	5	2
TurboTax (Intuit)	6	31
Capital One	7	none
TaxCaster (Intuit)	8	16
Credit Karma	9	none
American Express	10	7
Discover	11	13
Citibank	12	10
USAA	13	8
State Farm	14	47
LearnVest	15	none
Yahoo Finance	16	11
Easy Envelope Budget	17	42
US Bank	18	26
Lemon	19	none
Pageonce	20	23
Fidelity	21	12
Manilla	22	none
Identity Guard (Intersections)	23	none
Navy Federal FCU	24	none
PNC	25	19
iSpending	26	116
Barclaycard	27	35
Mortgage Calc (Zillow)	28	20
TD Bank	29	none
Quicken Money Management (Intuit)	30	17
TD Ameritrade	31	27
FreeCreditScore.com (Experian)	32	55
Pocket Expense	33	15
ING Direct (Capital One)	34	none
Quicken Loans	35	none
E*Trade	36	33
Spending Tracker	37	28
SunTrust	38	none
Western Union	39	none
iSpreadsheet	40	9
BB&T	41	46
Virtual Wallet (PNC)	42	40
Bloomberg	43	22
Budget	44	none
Expensify	45	53
Ally Bank	46	none
HSBC Personal	47	none
H&R Block	48	24
Bluebird (AmEx)	49	none
Seeking Alpha	50	none
Below top 50 iPhone
Craigslist mobile	not in finance	4
Money Magazine	none	6
ShareBuilder (Capital One)	114	14
CNBC	55	18
Real-time stock tracker	64	21
Vanguard	58	25
Morningstar Stockinvestor	198	29
Personal Capital	92	30
Regions Bank	54	32
Visual Budget	62	34
Merrill Lynch	84	36
Bloomberg TV	125	37
Mortgage calculator (Trulia)	102	38
SmartMoney Retirement Planner (Dow Jones)	none	39
Bills for iPad (iBear)	not in top 300	41
Budgets for iPad (iBear)	162	43
Checkbook free	53	44
Smart Budget	120	45
TD Ameritrade Mobile Tracker	86	48
EZ Financial Calculators	63	49
Schwab	60	50

Source: Netbanker observation of Apple App Store directly from iPad and iPhone around 6 PM Pacific, 7 Jan 2013

None = No app listed with the App Store for that device

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Note:
1. The Apple ranking system is a bit of a black box. But it’s generally believed to weigh heavily recent download activity.
2. Easy Envelope Budgeting (#18) is from a San Francisco-based Web developer Dayspring Technologies founded in 1998.

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Crossing Channels: Email Confirmation of Call-Center Conversations

By Jim Bruene Posted on August 13, 2012
Categories: Alerts & Messaging, Apple, Service

Someone in our house dropped their precious iPhone onto the floor Friday and cracked the screen into a hundred pieces (note 1). So after grabbing a new 4S model, I proceeded to do the online upgrade. Unfortunately, the new phone was unable to connect to AT&T. So, after a bit of Googling turned up no solid clues for a DIY solution, I was forced to dial the carrier’s 800 number.

It turned out to be an easy fix, simply reading off a pair of of 21-digit numbers from the iPhone box while the CSR flipped a few switches on her end (note 2). And I really liked the AT&T rep, who managed to be efficient yet personable (note 3), so it was a net positive experience with the carrier.

But what really impressed me was the followup email I received shortly after completing the call (see below). It outlined what had transpired and provided several useful links to help in the migration from the old phone to the new. In addition, the company wisely encouraged self-service account management with several links below the signature line. Finally, the company inserted the name of the actual rep I’d talked to at the bottom.

Bottom line: I’m a huge fan of email for financial services communications (note 4). It’s timely, it’s searchable, it’s easy to use, it’s instantly archived, it works on every device and it helps the customer feel like their bank/CU/card issuer is holding itself accountable. And if done right, it can save additional costly service calls. All this goodness for virtually no cost.

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AT&T email confirmation of call-center service change (11 Aug 2012)

Notes:
1. I’m not naming names, but she knows who she is.
2. Memo to Apple/AT&T: If you must use 21 digits, please insert some spaces so a human can read them.
3. Even though I have a personal account, I ended up in the "Business Solutions" call center, so their may be a higher level of service in this area.
4. See our report, Email Banking: Revitalizing the Channel published two summers ago (subscription).

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Apple Just Put a Mobile Wallet In 100+ Million iPhones: But Is This Passbook a Friend or Foe of Banks?

By Jim Bruene Posted on June 12, 2012
Categories: Apple, Credit/Debit Cards, Mobile Commerce, Mobile Payments, Wallets

If it wasn’t obvious already, Apple is becoming the operating system of your life. And since money touches much of what we do, it’s no surprise that the company is moving into the payments side.

Actually, Apple is already there. The most valuable company on the planet is already the biggest payments issuer, with 400 million payment-enable iTunes accounts.

Now, when iOS6 becomes available this fall, Apple will be the biggest mobile wallet provider as well, when 100+ million iPhones automatically getting one with the new OS upgrade.

The new baked-in wallet app is called Passbook, I presume because iWallet was taken, or Apple is saving it for something even bigger.

But regardless of the name, Passbook has broad implications in payments and commerce in general. One look at the UI (inset) shows what banks are up against. An app loaded with store cards! Just what a gazillion big-spending early adopters have been hoping for (congrats to Target and Starbucks for leading the way again).

The main reason ~~iWallet~~ Passbook is such a big deal, besides the Apple halo effect, is that it automatically opens your “virtual card” when you walk in the store. Yes, you read it correctly. Automatically. Opening. Mobile. Payment card.

For example, when you walk into Starbucks its virtual store card, rendered in 2D bar code, will be triggered on your phone. You just swipe the lock-screen notification, enter a PIN (if necessary), scan your phone at the POS, drink your coffee and enjoy the perks (see below).

Is the POS experience dramatically better than using your Visa/MasterCard plastic? Not really during those 15 seconds of your life, but it’s not worse either. Shaving 2 seconds off transaction time is not what this is about. It’s the retailer value-adds that make it a huge winner.

Smart merchants will tack loyalty points/rewards/amenities (how about a free shot of vanilla in that latte?) on to Passbook-enabled purchases and you will soon be conditioned to pay with your phone. Really, just having your receipt stored safely away in the Passbook app could make the difference between using the store card vs. MC/Visa.

Because Apple wants to be platform, not a bank, they are making the tools available to developers to create apps that play nice with Passbook along with all the other iPhone utilities. So I see this as bank/issuer friendly, so far anyway, though not everyone will benefit.

While this is only speculation, I see a couple things likely to happen:

1. Proprietary single-brand (closed loop) payments make a comeback: With a direct connection to the front-screen of your iPhone as soon as you walk in the door, retailers can put together compelling in-store loyalty offers on the fly. For example, I can walk into Best Buy, and up pops my store loyalty card on the front of my iPhone. And they can dangle all kinds of bennies at me in real time, while encouraging me to pay with my Best Buy credentials rendered in a QR code on the screen (and later via NFC or a “cloud” connection).

2. Banks and card issuers partner with retailers to become the preferred “Passbook card:” For stores that don’t want to bother with the payments piece, instead of presenting a store card with the customer walks in the door, they could present the preferred partner card. For example, Costco, which only takes American Express, could launch an AmEx Passbook card when customers walk in the door.

3. The beginning of the end for paper receipts: Users will have the comfort knowing their receipts are all accessible via iPhone (and in the iCloud). So they will opt out of paper receipts at the register.

4. Mobile offers/coupons just found a new home: If you want iPhone-wielding consumers to see your offer, Apple just created an instant place to store (and discover) deals. I’m not sure if this is good or bad for ad-supported banking, but it’s something to consider.

Bottom line: I could go on (for instance about Siri integration), but my head is about to explode with all the possibilities. Time will tell, but I think we just witnessed a watershed moment in mobile-enabled shopping and payments.

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Recommended reading:

Read the full analysis by Glenbrook’s Scott Loftesness here.
Fantastic stuff on on Quora too (HT to Brad Strothkamp for the link via Twitter).
The list of all the features via Techcrunch.

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