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Mastercard, First Data, and TSYS Partner with Apple to Enable Apple Pay for Mobile Payments

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Mastercard, First Data, and TSYS have partnered with Apple to enable Apple Pay for mobile payments. Apple Pay is a mobile payment service. Apple Pay works with iPhone 5, iPhone 6, and Apple Watch through an NFC antenna design, a dedicated chip called the Secure Element, and Touch ID security. Apple Pay can be set up by users with their credit or debit card on file from their iTunes Store account. The service will be available in October 2014.

Apple Pay supports credit and debit cards from the three major payment networks, American Express, MasterCard and Visa, issued by the largest banks, with ~83% of purchase volume in the U.S. Apple Watch will also work at the over 220,000 merchant locations across the U.S. that have contactless payment enabled.

Key benefits identified by Apple for the service are:

  • Apple does not collect purchase history so purchases remain private
  • Transaction security is improved. Card numbers are not stored on the device nor on Apple servers. A unique Device Account Number is assigned, encrypted and securely stored in the Secure Element on the consumer’s Apple device. Each transaction is authorized with a one-time unique number using the Device Account Number and Apple Pay creates a dynamic security code to securely validate each transaction. 

Payments via Apple Pay integrate with the MasterCard Digital Enablement Service (MDES) which is provided by MasterCard to banks, allows a connected device to be used for payments.

Both First Data and TSYS are providing Apple with:

  • Tokenization security
  • Facilitation and enablement for issuers, merchants and app developers in processing transactions from Apple Pay. 

Apple Pay is a major developent in mobile payment services. The major inhibiter to mobile payment adoption has been consumer concerns over security. This offering addresses the major security concerns with best practice solutions, tokenization and fingerprint sign-on. It also addresses customer concerns about tracking histories of purchases. Implementation with effective delivery on the brand promise will be critical to the success or failure of this service. 

More important to the success of Apple Pay than the technical requirements of this service is a broad ecosystem of participants to drive usability for consumers. This announcement has come with the participation of most card issuing banks, card schemes, and retailers in the U.S. participating. Creating a broad ecosystem for a new payments service in the U.S. has been the reason most vendors fail. If customers, especially high spending custoemrs like Apple users, can use the services effortlessly, then the payment service can become self sustaining and eventually displace physical card initiated payments. 

Because the payments industry is so large, if Apple succeeds with this service, it could restructure the retail payments industry over time, eliminating many mid-tier vendors. 

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