How does ApplePay work?

[Appl3FTW]

How exactly does apple pay work, who gets charged who?

1. Does Apple collect a percentage from the sales, and who are they collecting from? Are they charging the stores so they get a cut from the store sales? or Are they charging the credit card companies?

 

[Eitel]

How exactly does apple pay work, who gets charged who?

1. Does Apple collect a percentage from the sales, and who are they collecting from? Are they charging the stores so they get a cut from the store sales? or Are they charging the credit card companies?

Apple collects a 0.15% charge. The banks and CC companies pay that from what they already collect from the stores. Stores don't pay anything more of what they already pay.

 

[Appl3FTW]

Apple collects a 0.15% charge. The banks and CC companies pay that from what they already collect from the stores. Stores don't pay anything more of what they already pay.

See that's what I was thinking, if apple is charging the CC/bank and not the stores... and the stores aren't paying more than what they already are paying, then WHY are they stopping apple pay? it's not like walmart, cvs and riteaid are paying apple right?

 

[mantan]

The above is correct. There isn't an additional fee built into Apple Pay.

I imagine for the banks and credit cards there are 3 main benefits...

1) It encourages use. Always a good thing.

2) It allows for an anonymous secure transaction that has much less potential for fraud than a traditional credit card. So there is a potential decrease in costs.

3) It lets Apple be a friendlier face in the battle against MCX and their ultimate goal to change the system away from credit/debit cards and the associated fees.

 

[legioxi]

it's not like walmart, cvs and riteaid are paying apple right?

Correct. But their competing system (due out next year) will help them avoid the bank/CC fees altogether. So they are pushing for that and cutting out extra ways to use CCs. Or at least that is the going assumption.

 

[mantan]

See that's what I was thinking, if apple is charging the CC/bank and not the stores... and the stores aren't paying more than what they already are paying, then WHY are they stopping apple pay? it's not like walmart, cvs and riteaid are paying apple right?

Because their goal through MCX and CurrentC is to create a system that bypasses credit cards and the fees all together.

They want to save the 2%-4% and just as importantly, they want a system that allows them to track your behavior as a consumer. Apple Pay is completely anonymous. So they have no way of tracking your spending, sending you targeted advertising at the point of sale automatically.

The program was Apple Pay is very convenient. And if it gets a 6 month headstart on CurrentC, a lot of users are not going to want to switch to a mobile payment system that seems 'less convenient.'

(not to mention all the security, access issues around CurrentC)

 

[oddnendz]

You also can use debit cards with Apple Pay.

 

[deeddawg]

I imagine for the banks and credit cards there are 3 main benefits...

There is a singular HUGE benefit to the card issuers: fraud reduction. Apple Pay transactions are vastly more secure than conventional transactions. It's an implementation of EMV Tokenization. By encouraging people to shift over to Apply Pay the card issuers expect to reduce their fraud costs by far more than they pay Apple.

Though also if they're smart, the payment networks / card issuers really want to get people used to using Apple Pay well in advance of CurrentC becoming widely available. Increases MCX's barrier to entry if they have to also surmount an existing base of people already used to paying with their phone via a different method.

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How exactly does apple pay work

Here's a good write up: http://www.kirklennon.com/a/applepay.html

Something to note: Apple actually isn't in the middle of any of the transactions; everything happens over the same networks your credit/debit transactions have always happened over.

 

[opfreak]

Because their goal through MCX and CurrentC is to create a system that bypasses credit cards and the fees all together.

They want to save the 2%-4% and just as importantly, they want a system that allows them to track your behavior as a consumer. Apple Pay is completely anonymous. So they have no way of tracking your spending, sending you targeted advertising at the point of sale automatically.

The program was Apple Pay is very convenient. And if it gets a 6 month headstart on CurrentC, a lot of users are not going to want to switch to a mobile payment system that seems 'less convenient.'

(not to mention all the security, access issues around CurrentC)

apple pay cannot be completely anonymous if I can return an item without a receipt.

while stores might not get your name, then can still build a profile on your shopping.

 

[Eitel]

apple pay cannot be completely anonymous if I can return an item without a receipt.

while stores might not get your name, then can still build a profile on your shopping.

They get a one time number tied to the purchase. Next time you go again, they get a different number. They have no way to tied both purchases to you, and they never get your name from the transaction.

They could push the use of reward cards. Then they have something to track your purchases.

 

[Menel]

How exactly does apple pay work, who gets charged who?

1. Does Apple collect a percentage from the sales, and who are they collecting from? Are they charging the stores so they get a cut from the store sales? or Are they charging the credit card companies?

When you pay.

iPhone transmit token to merchant terminal.
merchant terminal transmit to merchant's payment processor.
Payment processor transmit token to VISA.
VISA collects their typical 2-3% fee.
VISA gives .15% of this fee to Apple, for providing mechanism and reducing their fraud rates.
VISA Token Service matches the token to their database of account numbers and sends to Issuer/Bank.
Issuer/Bank approves, and sends authorization back up the path to the merchant terminal.

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See that's what I was thinking, if apple is charging the CC/bank and not the stores... and the stores aren't paying more than what they already are paying, then WHY are they stopping apple pay? it's not like walmart, cvs and riteaid are paying apple right?

The why is two-fold.

The token generation stops them from mining data about consumer habits.
MCX/CurrentC is designed (by linking to SSN and ACH checking account) to help them eliminate the fees they have been paying all these years to VISA, they are bitter.

 

[opfreak]

They get a one time number tied to the purchase. Next time you go again, they get a different number. They have no way to tied both purchases to you, and they never get your name from the transaction.

They could push the use of reward cards. Then they have something to track your purchases.

so how can you do a receipt-less return if there is no tie you?

 

[tjl3]

so how can you do a receipt-less return if there is no tie you?

The Dynamic Account Number doesn't change every purchase. This is no different from using your credit card at a store and having the merchant processor capture card holder data and passing it back to the merchant.

 

[posguy99]

so how can you do a receipt-less return if there is no tie you?

Same as any other time. Why do you think there has to be a "tie to you" in order to do a return without receipt? Certainly no POS I've ever supported (and I do this for a living) had a requirement like that.

Now, you can wrap around it a *procedure* that a store employee had to bring back the original transaction in order to process a return. Or you could require that the refund go back to the same payment instrument that was originally used, in which case it's another tokenized ApplePay transaction.

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The Dynamic Account Number doesn't change every purchase. This is no different from using your credit card at a store and having the merchant processor capture card holder data and passing it back to the merchant.

I'd hope that there was a difference, since what you describe is against the DSS. It's also against the law in, for example, California, where you cannot collect personal information as a result of a transaction.

 

[opfreak]

Same as any other time. Why do you think there has to be a "tie to you" in order to do a return without receipt? Certainly no POS I've ever supported (and I do this for a living) had a requirement like that.

Now, you can wrap around it a *procedure* that a store employee had to bring back the original transaction in order to process a return. Or you could require that the refund go back to the same payment instrument that was originally used, in which case it's another tokenized ApplePay transaction.

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I'd hope that there was a difference, since what you describe is against the DSS. It's also against the law in, for example, California, where you cannot collect personal information as a result of a transaction.

I go back to target without a receipt they can look up the purchase using my CC and process a refund. So make almost every other store.

Without a way to look up that payment they can refuse the return

 

[tjl3]

I'd hope that there was a difference, since what you describe is against the DSS. It's also against the law in, for example, California, where you cannot collect personal information as a result of a transaction.

Your credit card number doesn't change after every transaction, so why would your DAN? The DAN is randomly generated when you enter a CC into Passbook and stored in the Secure Element. When you use Pay it creates a one time authorization key, on top of the other security protocols that happen at the point of sale.

I didn't mean personal information, but demographics. When you swipe your card, the processor can capture your age, gender, location, etc. Any information that was available to a merchant processor before will still be available if you use Pay. Apple is simply not collecting your personal data when you use your device.

 

[jblagden]

If Your Bank Supports It

You also can use debit cards with Apple Pay.

Yeah, but only if your bank supports it.

I personally prefer debit cards over credit cards, as you probably do.

The only trouble with using debit cards with Apple Pay is that not all banks support Apple Pay. My bank still doesn't support it.

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I go back to target without a receipt they can look up the purchase using my CC and process a refund. So make almost every other store.

Without a way to look up that payment they can refuse the return

Yeah, they can refuse the return. If you're lucky, they'll give you a store credit.

 

[oddnendz]

Yeah, but only if your bank supports it.

I personally prefer debit cards over credit cards, as you probably do.

The only trouble with using debit cards with Apple Pay is that not all banks support Apple Pay. My bank still doesn't support it.

Actually my bank only supports the Visa check card. It doesn't accept the ATM card.

More banks will support ApplePay. I have accounts in 2 different credit unions and one bank. The bank and one of credit unions support Apple Pay. The other credit union is "looking into it." *gives the evil eye to NCSECU* But then again, NCSECU has always been behind the technological curve. Fortunately, it is not my main checking account.

 

[takeshi74]

The only trouble with using debit cards with Apple Pay is that not all banks support Apple Pay.

That affects both credit and debit cards.