Apple Pay / Google Wallet: Not So Fast

[ControlD]

I haven't seen this posted yet and I found this interesting.

http://www.theverge.com/2014/10/25/7069863/retailers-are-disabling-nfc-readers-to-shut-out-apple-pay

I was wondering what incentive big retailers had to simply endorse a different third party system over what is being used today. Turns out, those same big retailers already have their own electronic pay system that should be going into service in the near future. I wonder what Apple and Google are going to have to offer these retailers to actually get their systems to be accepted.

 

[master_shake_]

so this then?

 

[WelshBloke]

I still don't see the advantage of any of these iffy payment scheme's for physical payments. What's the advantage of Google wallet/Apple pay/insertpaymentschemehere over using a contactless credit card?

 

[ControlD]

I still don't see the advantage of any of these iffy payment scheme's for physical payments. What's the advantage of Google wallet/Apple pay/insertpaymentschemehere over using a contactless credit card?

I think the "benefit" being talked about here is to the retailer, not necessarily for the consumer so much. I guess it could be handy to simply touch your phone to a reader for checkout. The real benefit for the retailer is cutting the credit card companies and their fees out of the transaction. At least that's how I am reading it.

 

[Eug]

It should be noted that for every transaction made through Apple Pay, Apple gets a cut. The retailers get nothing. I don't know how it works with Google Wallet.

 

[Megatomic]

It should be noted that for every transaction made through Apple Pay, Apple gets a cut. The retailers get nothing. I don't know how it works with Google Wallet.

I'd guess that it's less than the cut taken by Visa/MC/Amex then? If not, how do they sell ApplePay to the retailers? Honest question.

 

[ControlD]

I'd guess that it's less than the cut taken by Visa/MC/Amex then? If not, how do they sell ApplePay to the retailers? Honest question.

I think Apple is getting their cut from the credit card companies / banks, so if I had to guess the hit to the retailers is the same. The banks like Apple's solution because the transactions are still tied to traditional credit cards. The retailers like their new solution because it gets rid of the third party credit card completely.

 

[kpkp]

Apple Pay is supposed to give anonymity to the costumer and that is pissing of most of the retailers. Even if I often do not support Apple views/strategies I think here is worth supporting them.

 

[openwheel]

Google Wallet, Apple Pay and any other layer of payment system are doomed to fail anyway. It will be used only either by low income people who want to be hip or people with low credit scores.

Just another layer for sucking fees. The consumer pays for it one way or another. It will reduce cash back/miles/points incentives for those with excellent credit scores, higher costs of goods, or both.

So, why would I want to support these payment systems? I can choose a credit card out of my wallet faster than changing it on a touch screen, and fraud is not an issue whatsoever, so what's the advantage for another layer of fee suckers?

 

[kpkp]

Why fraud wouldn't be an issue? Because banks/credit cards cover it? Think again, where does the money they use to cover the fraud come from...

 

[openwheel]

suddenly when Apple Pay gives anonymity to consumer will stop credit card companies from paying low wages for the fraud alert department in India? Think again, that's wishful thinking imo. Fraudulent charges will happen and fraud department will always be there with or without Apple Pay.

 

[Megatomic]

Google Wallet, Apple Pay and any other layer of payment system are doomed to fail anyway. It will be used only either by low income people who want to be hip or people with low credit scores.

Just another layer for sucking fees. The consumer pays for it one way or another. It will reduce cash back/miles/points incentives for those with excellent credit scores, higher costs of goods, or both.

So, why would I want to support these payment systems? I can choose a credit card out of my wallet faster than changing it on a touch screen, and fraud is not an issue whatsoever, so what's the advantage for another layer of fee suckers?

This is a fairly inflammatory response. How do you arrive at the conclusion that Apple Pay will be used by poor people or those with low credit scores?

 

[fuzzybabybunny]

The situation is very very simple.

Credit card companies charge the retailer ~2-3% of the transaction amount. If the retailer makes a sale of $100, the credit card company pays the retailer $97. The credit card company then collects $100 from the cardholder.

Retailers don't like losing out on collecting that extra $3 which really adds up.

So they want to roll their own payment processing system (CurrentC) that debits directly from a customer's bank account, which has much lower fees.

 

[WelshBloke]

I think the "benefit" being talked about here is to the retailer, not necessarily for the consumer so much. I guess it could be handy to simply touch your phone to a reader for checkout. The real benefit for the retailer is cutting the credit card companies and their fees out of the transaction. At least that's how I am reading it.

Fair enough, but it's just as handy to touch your credit card to a reader as touch your phone to one.

Apple Pay is supposed to give anonymity to the costumer and that is pissing of most of the retailers. Even if I often do not support Apple views/strategies I think here is worth supporting them.

I don't really want my purchases to be anonymous, I want a clear trail of transaction between me and the seller.

All I'm seeing is new and interesting ways for things to fuck up by adding an extra (anonymising? Seriously? In a financial transaction) party.

 

[dawheat]

It should be noted that for every transaction made through Apple Pay, Apple gets a cut. The retailers get nothing. I don't know how it works with Google Wallet.

Umm the retailers get the transaction like they would with a normal in-store credit card order. Apple's cut as mentioned comes from the interchange fee that goes to the card issuer/bank.

What major retailers don't want are credit-card based payments to become even more entrenched if Apple Pay/Google Wallet takes off. Their goal is move away from credit cards as a whole model which is self-serving only to them at the expense of consumer benefit.

 

[dawheat]

The situation is very very simple.

Credit card companies charge the retailer ~2-3% of the transaction amount. If the retailer makes a sale of $100, the credit card company pays the retailer $97. The credit card company then collects $100 from the cardholder.

Retailers don't like losing out on collecting that extra $3 which really adds up.

So they want to roll their own payment processing system (CurrentC) that debits directly from a customer's bank account, which has much lower fees.

Say it's 3% for a transaction, the cost breakdown of that 3% tends to be:

- 60% is interchange that goes to the credit card issuer to pay for reward programs, fraud, service, etc.
- 30% to the merchant's acquirer to process the transaction
- 10% to the payment network (Visa, MasterCard) - this tends to be a fixed fee so it varies on the size of the transaction

Customers want no liability and rewards for using their credit card. That doesn't come for free. I generally don't use my debit card anywhere b/c any fraud impacts your checking balance until it's resolved vs. some available credit you never use. You get much more limited protection and generally no rewards.

 

[Eug]

The Apple Pay cost comes from the bank, but it represents a new expense for them.

 

[s44]

CurrenC looks like a massive money/data-grab by the retailers with no upside at all for the consumer.

 

[ControlD]

CurrenC looks like a massive money/data-grab by the retailers with no upside at all for the consumer.

Agreed, but I wonder if either system truly has an upside for the consumer. If the Apple/Google/whatever pay system is a new cost to the bank, are they simply going to smile and eat that cost? There is no way the shareholders will stand for that. I am betting that somehow that cost will be passed on to the consumer.

 

[fuzzybabybunny]

Say it's 3% for a transaction, the cost breakdown of that 3% tends to be:

- 60% is interchange that goes to the credit card issuer to pay for reward programs, fraud, service, etc.
- 30% to the merchant's acquirer to process the transaction
- 10% to the payment network (Visa, MasterCard) - this tends to be a fixed fee so it varies on the size of the transaction

Customers want no liability and rewards for using their credit card. That doesn't come for free. I generally don't use my debit card anywhere b/c any fraud impacts your checking balance until it's resolved vs. some available credit you never use. You get much more limited protection and generally no rewards.

Yeah, pretty much. I prefer having the CC companies as a firewall between me and fraud. The rewards and convenience are great too as well as building my credit score.

I will NOT sign up for any payment method that takes directly from my bank account, with the exception of paying off my credit cards.

As such, I won't be using CurrentC, although I understand why retailers want it. But it's all benefit for the retailer and very little benefit for the consumer.

 

[PokerGuy]

CurrenC looks like a massive money/data-grab by the retailers with no upside at all for the consumer.

Yep. No way I'd want to use that, why would I want to get no rewards and give up more information to the retailers? For what benefit? No thanks.

At the same time, I don't see any point in using apple pay or google pay or any of those things, they serve no purpose for me as a consumer, except to add more layers of potential problems when something does go wrong.

 

[Eug]

CurrenC looks like a massive money/data-grab by the retailers with no upside at all for the consumer.

The intent by the retailers is to have retailer promotions for use of the card. The promotions would not apply if you use a credit card. This makes sense as CurrenC would be less cost for the retailers.

I do note that in Canada, if you use bank debit, some stores actually charge less than if you use a credit card. If you use a credit card at some computer electronics stores, they charge you 3% more.

The annoying part is the stores which stopped doing this basically just decided to charge everyone the higher credit card price.

Anyhow, up here in Canada I will continue to just use my RFID-endowed credit and debit cards, as appropriate. I actually prefer using credit cards in most cases, because I get cash back. For my Amex it's 2% cash back on all transactions.

 

[Mike64]

Google Wallet, Apple Pay and any other layer of payment system are doomed to fail anyway. It will be used only either by low income people who want to be hip or people with low credit scores.

How do you come up with that? Apple Pay just stores your credit card (or debit card) info on a chip in your phone. You still need the credit card (or debit card) in the first place.

Maybe you're confusing it with the system the retailers want to implement - CurrentC - which is basically just a replacement for debit cards and fits your scenario better than either Apple Pay or Google Wallet.

 

[Mike64]

CurrenC looks like a massive money/data-grab by the retailers with no upside at all for the consumer.

Exactly - it's like combining a debit card with a loyalty/rewards card all rolled into one. No thanks.

 

[openwheel]

How do you come up with that? Apple Pay just stores your credit card (or debit card) info on a chip in your phone. You still need the credit card (or debit card) in the first place.

Maybe you're confusing it with the system the retailers want to implement - CurrentC - which is basically just a replacement for debit cards and fits your scenario better than either Apple Pay or Google Wallet.

As a consumer, why would I want someone else to make more profit off my of credit card transaction? As if the retailer and credit card company don't make enough profit already? Unless, I am strictly a debit card or low FICO credit card user who don't care about cashback/miles.

Either way, adding another layer simply makes no sense from a consumer's point of view.