MasterCard and more than a dozen U.S. banks fired a big salvo at Apple last week with the announcement that they were launching their own mobile tap-and-pay apps.
Backed by MasterCard’s MasterPass system, the banks’ apps will allow customers to load their debit and credit cards onto their smartphones, then use them to make transactions at merchants who have tap-and-pay terminals. It’s very similar to how Apple Pay works.
MasterCard expects to expand the program beyond the United States quickly, with a planned Canadian launch some time within the next six to 12 months.
For the banks, the credit card company’s involvement is something of a god-send. Many – especially in Canada – had been resisting Apple’s encroachment into payments because they didn’t want the technology company getting between them and their customers. They also didn’t want to give Apple a cut of the action, which is why many held off getting on board with Apple Pay for as long as possible.
MasterCard is offering banks a holy grail: The company isn’t charging them anything to use its system beyond the small cut of each credit card transaction that it’s always been getting and it’s letting the banks splash their own branding on the apps. The banks are thus able to keep the customer relationship and don’t have to pony up any more money. It’s a pretty sweet deal.
As far as customers go, MasterCard and the banks are pushing trust as their differentiator. Consumers are already comfortable and secure with these institutions handling their money, so why not trust them to handle mobile payments as well? Sounds good.
The only problem with the whole plan is that none of it will work on the iPhone.
Apple Pay, MasterPass apps and various other mobile payment systems all need to use the near-field communications (NFC) chips in smartphones to make transfers with merchant terminals. Many Android phone makers have opened up that NFC capability to outside developers, but not Apple—the company is jealously reserving it solely for Apple Pay.
This is a problem in both the United States and Canada, where about 40% of smartphone owners use iPhones. How MasterCard and the banks plan to reach critical mass without access to nearly half of their customers is a head-scratcher.
Here in Canada, wireless carriers have already tried to field an Apple Pay competitor—and failed. SureTap, a joint venture between Bell, Rogers and Telus, is folding on Aug. 26, after an unsuccessful run on just BlackBerry and Android devices. The head of the company is putting the blame squarely on Apple. As he told IT Business:
“If we’d been able to deploy a wallet on Apple and non-Apple handsets, we would have more access for issuers and it would still be in existence today. We went to Apple and talked about getting access to the secure element. The answers was clear—no.”
On the one hand, it seems foolish for third-parties—whether it’s MasterCard, banks or wireless carriers—to launch mobile-payment apps knowing full well they don’t have access to a huge part of the market.
On the other hand, there’s also a case to be made that Apple’s obstinance with its NFC capability is an unfair advantage that it’s giving itself, not unlike Google favouring its own services in search results.
NFC is still relatively new on iPhones and it’s possible that Apple may in fact open up the capability to outsiders at some point, but so far, the company has made no overtures to that effect.
Google is getting raked over the coals in Europe for its allegedly anti-competitive search results. It might be time for competition watchdogs in North America to have a similar look at Apple and the NFC issue.
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