By Ken Musante
Napa Payments and Consulting
Apple is preparing to release Tap to Pay, a feature that allows U.S. merchants to download an app to enable an iPhone to accept NFC transactions in a card-present environment. About this news, CNBC wrote, "The announcement effectively turns iPhones into point-of-sale terminals without additional hardware." Though this is innovative and groundbreaking, it's not industry altering. At least not yet.
This is partially true. The development obviates the need for a card reader for chip transactions. This will put a dent in the sale of BT card readers. A merchant account is still required, however and initially, Stripe will be the only acquirer offering the service. For its part, Stripe will still need to offer card readers for Android apps and a host of other instances. A high-volume retailer still needs to accommodate the magstripe for gift cards and fallback transactions on iOS and Android. High-volume retailers may also desire a form factor for the card interaction separate from a cell phone. Stripe acknowledged this with their purchase of BBPOS earlier this year.
At the margin, this innovation lessens the cost for merchants in two ways. First, in many instances, it obviates the need for a reader. Second, it can ensure more transactions qualify for card-present rates and lessen fraud by providing the protection afforded an EMV transaction. Though Stripe is the only initial supported platform, Apple will certify additional processors in due time.
David Leppek, founder and CEO of Pace Software, has been developing payment apps. "Apple's pursuit of Tap to Pay is huge," he stated. "Their technology was acquired with Mobeewave in 2020, and it was a pursuit of the CPoC [Contactless Payments on a Commercial off-the-shelf device] EMV standard. Apple has the ability to push this technology to all future Apple users. Any Android solution, on the other hand, would have to have the user download their App.
"Android CPoC/MPoC solutions are also moments away, so this technology is poised to push contactless and empower the micro merchant, but there are other use cases being explored that could take advantage of Apple's willingness to offer Tap to Pay.”
Unlike with ApplePay, it will be impractical to charge issuers. Merchants need to accept every card presented regardless of whether the issuer struck a deal with Apple. Apple may or may not charge a usage fee to the merchant or processor, but that too is ordinary in our industry. What could allow this innovation to be even more transformational is if Apple used this innovation as part of a newly developed person-to-person payments infrastructure.
As a payfac, Apple could enable each individual who downloaded the app to be a sub-merchant of Apple. That arrangement could be one pillar of Apple’s Cash app, which would enable individuals to conduct all their banking and payments. Apple already has a consumer credit card, and with Zelle or Venmo connected to their Cash app, it could be a category killer for banks.
The Cash app (CApple) could easily accept checks via remote deposit capture in addition to other funding avenues. Apple could have done this even without the sub-merchant feature, but this innovation provides one additional and unique funding method, which increases the functionality of the Cash app as it can now be funded from card payments.
This is speculation, but it illustrates the possibilities. Apple, which likely has already planned the end game, may determine it's better to monetize the solution through processors like Stripe and Block (formerly Square) rather than competing directly with them. Yes, their announcement is innovative and groundbreaking but at the margin. Until it's further applied, it doesn't significantly alter the landscape. 
As founder of Humboldt Merchant Services, co-founder of Eureka Payments, former executive at WePay, and founder of Napa Payments and Consulting, Ken Musante has experience in all aspects of successful ISO building. Contact him at kenm@napapaymentsandconsulting.com, 707-7656 or www.linkedin.com/in/ken-musante-us/.
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