Can someone explain why Apple Pay can't just be a solution that works anywhere where contactless nfc payments are accepted other than wanting to be in control of the process? Not being snide or a "hater", asking seriously.
I heard something like $1 for every $100 spent. I've read some where that apple's cut into the processing fee was too much for the banks to deal with as it would cut into their profits
The banks make most of their profits from the transaction fees that merchants pay when you use debit/credit. Since Apple acts as a messenger here, they want to take a cut from that fee and the banks don't like that because that means they wouldn't make as much money. It has nothing to do with lack of tech (most places have had the tech for a while)
As most credit cards companies in Canada use NFC in there cards, other than security (which would reduce costs for the CC companies), what does Apple bring to the table for them? Yes convenience for customers but banks don't care about that too much.
I wonder if the reduction in profit is offset by the reduced costs of fraud. If I lose my credit card with tap, anyone could use it and that must happen lots.
I think they need cooperation from the banks as it is their merchant terminals that are used in each store. The banks in Australia and Apple cannot come to an agreement on interchange fees.
Apple Pay is the first implementation of a new EMV tokenization standard. Short version: when you add your card to your Wallet, your iPhone contacts a server operated by the card issuer and eventually your bank, to validate your card is valid and create an alias (the "device account number" or DAN). Both your bank and your iPhone remember the DAN. Apple is briefly involved in this process.
When you use Apple Pay, the merchant's terminal only receives the DAN. It submits that, along with some other encrypted fields. Your bank must then map the DAN to your account, validate the other fields, and then decide whether to authorize the transaction. This is why NFC doesn't "just work": your iPhone doesn't have your true account number, and the bank must build a new back-end systems to do the mapping. Also, Apple is not involved in the transaction at all -- only the initial step to add the card to your Wallet.
Among the other fields in your transaction is a sequence number that is unique to the transaction. There's also a merchant ID, and a cryptographic signature. So, even if someone were to capture your DAN, they can't use it to commit fraud. They can't even "replay" the transaction a second time to double-bill you. This is the additional security that Apple Pay provides for the bank.
Your iPhone looks like a contactless card to the merchant terminal, so there should be no changes required at the merchant if they already support NFC. However, there have been some issues with some transaction processors corrupting the data in transit, requiring updated software and hardware. But others have had no problem.
In the US, banks have been willing to pay a small amount in exchange for this additional security. One benefit is they don't have to reissue a card if the DAN is compromised: you just delete the card from your Wallet and add it again, and you'll have a new DAN. Historically, this has been a large expense over the past few years when the systems of high-profile retailers have been compromised. And of course, you have to authenticate a transaction on the iPhone each time. Also, you can remotely delete the contents of your Wallet.
Apple's fee? In the US, it is reportedly 15 cents per $100. The bank's portion of the transaction fee is about $1.50 per $100, so it's a relatively small amount in exchange for eliminating an entire class of credit card fraud. A few banks have botched the implementation by not sufficiently validating the addition of a card to the Wallet, but I expect that will eventually be resolved.
