Credit unions weren’t left out of the party when Apple announced Tuesday the long-expected launch of the payments service that its CEO promises will change everything.
In a media splash in its California hometown, the tech giant rolled out its new iPhone 6 models and Apple Watch, all supporting the new Apple Pay payments network.
Apple Pay will include near-field communications and tokenization techniques to shield account info stored in its new devices. The big card brands — MasterCard, Visa, and American Express — already are along for the ride.
In fact, Visa immediately followed Apple’s announcement with one of its own: the launch of the Visa Token Service. Here’s a simple description: “Visa Token Service replaces sensitive payment account information found on plastic cards with a digital account number or ‘token.’ Because tokens do not carry a consumer’s payment account details, such as the 16-digit account number, they can be safely stored by online merchants or on mobile devices to facilitate e-commerce and mobile payments.” Oh, and this service is available on all major platforms, which would include Android and Microsoft.
MasterCard will be offering its own version, labeled MasterCard Digital Enablement Service. “This shift of every device becoming a shopping device is the biggest change we’ve seen in payments since the introduction of plastic, and yesterday’s news is a defining moment in the industry’s evolution,” MasterCard said in a release.
Navy Out In Front
Also joining in are card issuers that represent a reported 83% of the credit card purchase volume, including Bank of America, Wells Fargo, JP Morgan Chase, and Navy Federal Credit Union ($60.49B, Vienna, VA).
“Navy Federal Credit Union is proud to be one of the first financial institutions to provide Apple Pay later this fall. With it, we'll be able to deliver on the promise of easy and secure mobile payments, and add a layer of convenience and security to using Navy Federal credit and debit cards,” the country’s largest credit union said in its own announcement.
As for the processors. Fiserv announced Wednesday morning that it will offer the Visa and MasterCard tokenization services to its card processing clients, including those on its Accel debit processing network.
“By supporting tokenization capabilities, Fiserv ensures that its financial institution clients can play an integral role in the mobile payments ecosystem,” the company said.
CO-OP Holding Back
Meanwhile, in a statement on Wednesday, CO-OP expressed concern about Apple Pay, specifically about interchange rates for those tokenized transactions.
“It appears Apple has negotiated to receive card present-equivalent interchange in recognition of the lower fraud costs that we expect tokenization to deliver,” CEO Stan Hollen says.
“CO-OP is working with the networks to make certain that credit union cards aren’t disadvantaged versus big banks within an Apple wallet. This is part of a broader strategy on tokenization that we are re-shaping as facts become available to us,” the CUSO chief says, adding that CO-OP is “in active negotiations with Visa and MasterCard to bring the lowest aggregated issuer fees to our credit unions.”
According to Apple CEO Tim Cook, his company will not be a payments processor, but “Apple Pay will forever change the way all of us buy things.” He also noted that more than 200,000 point-of-sale locations will be ready to accept Apple Pay when it becomes available in the next couple months.
Big promise, but then, this is the company that gave us revolutionary products such as tablets, smartphones, and the iPod.
The big loser here might be PayPal, which uses a different system altogether. Some pundits already are calling Apple Pay a “ PayPal killer.” Amazon's planned payments service, called Amazon Local Register, will surely feel Apple’s pressure. (And lest we get too comfortable in credit union land, Apple Pay is apparently going to support Square.)