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Author's profile photo Drew Hofler

ApplePay’s Secret (Apple)Sauce

What is so special about ApplePay?

Other mobile wallets have struggled to gain traction, most famously Google’s failed attempt.  And the day before the ApplePay announcement, quoted American Express executive Josh Silverman essentially calling their mobile wallets a failure.  In his opinion, “the swipe isn’t especially broken”…in other words, how much easier is it to tap your phone than to swipe your card? What does that save you, 5 seconds? Big deal!

I believe he is spot on…But I think his statement also misses the point entirely.

Google wallet, Amex wallet and others have failed so far because they have attempted to “fix” the card swipe by replacing it with a phone scan or tap that is really not much different.  There is simply is no burning platform in consumer card payment around the inconvenience of swiping a card….it’s just not that big a deal.

When it comes to security, however, the entire industry is on fire!   (Hello Michael’s, OfficeMax, Target, Home Depot, etc…).  Security is most certainly a big deal!

It is a less sexy aspect of ApplePay that is actually the central feature that might just finally move the needle on replacing plastic cards.  Because ApplePay is not just removing the swipe from the point of sale, it is removing the card number and security code altogether.

Here’s the relevant feature as explained on NPR:

“Google has a mobile wallet that stores credit card information. But Apple does not do that. Apple Pay stores a unique ID that’s scrambled up with encryption inside a locker in the phone….When you want to make a purchase, the phone communicates with the bank to get a token. The phone gives that token to the merchant…And even if the token gets stolen, it’s just for one-time use. It’s not good for your next purchase or for the black market” (emphasis mine).

In the age of the Networked Economy, there is no reason why sensitive consumer card or bank account information should proliferate on every single point of sale device we use to make transactions. The same holds true for payments in B2B context.   Why should every electronic ACH payment (in the US, for example) require that a paying company collect, manage and maintain sensitive vendor bank information?  While not as prominent an issue as consumer card data, the risk is no less real.

As ApplePay is attempting to remove payment risk for consumers, AribaPay is removing payment risk for B2B payments ….by substituting a non-sensitive proxy number at time of payment.  Now, I’m not saying that ApplePay took our idea (or our naming convention)…I’m just saying that it is a process waiting for a solution in both the B2B and consumer payments world.

Apple’s idea with ApplePay to replace the card number with a non-sensitive proxy number that enables the sensitive information to be stored in a single, secure location away from the prying eyes (and code) of hackers, is a brilliant use of the Networked Economy…and a potential game changer.

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