When Apple Pay Goes Live
Apple Pay goes live Monday and questions circle around what this will mean, especially for credit unions that are not involved in the launch.
That is, every credit union except for the $60 billion Navy Federal Credit Union in Vienna, Va., the only credit union named by Apple in its initial group of financial institutions.
Apple has imposed significant secrecy on credit unions and vendors that want a role in Apple Pay. Several talked candidly with CU Times but many asked for anonymity.
Monday is expected to be a big day for every card-issuing credit union.
California based payments expert Richard Crone advised credit unions other than Navy Federal to be prepared for call center inquiries that revolve around the question of, “why can’t I use your credit card in Apple Pay?”
Crone also said that he expected many calls to come in from excluded phone owners such as Android, Windows, and older iPhone owners who will want to know what plan there is to give them a mobile payment capability. He urged credit unions to be ready with answers.
Some say the big question is does the Apple Pay launch matter?
Although most experts agree that in many ways Apple Pay looks like a rebirth of the stalled Google Wallet which was introduced in 2011 (many of the merchants are the same, from Whole Foods to Walgreens) and promptly went nowhere, Apple nonetheless has demonstrated genius at creating consumer buzz.
The buzz will be loud on Monday and. likely, it will get louder as Apple Pay users post their experiences on Twitter, Facebook, and the other social outlets.
The other big question: when will credit unions not involved in the launch be able to offer Apple Pay? Apple has said it has 500 more institutions in a queue but how fast that queue is moving is an open question.
One large credit union that told C U Times it had just signed an Apple Pay agreement with Apple indicated it had no firm launch date.
An executive with that institution explained why it took the Apple Pay plunge: “We want to be relevant to millennials. We want to go where they are going. We had to pursue this.”
At the $5.6 billion, Digital Credit Union in Malborough, Mass, vice president Julie Moran said, “As the role of a digital wallet becomes more prevalent, we’re committed to looking at a number of mobile payment options including Apple Pay.”
Digital is also a supporter of CU Wallet, the credit union-owned mobile payments service.
“CU Wallet is working to provide a comprehensive, industry-wide, cutting-edge mobile payment solution to DCU and their nearly 80 credit union partners,” Moran said.
A card processor with many credit union clients told CU Times that it expected to be able to enroll a first group into Apple Pay in early November. Others may have to wait until the first quarter of 2015. Apple, this executive indicated, is taking a deliberate approach in order to smooth out any kinks, certainly before the holiday shopping season kickoff in late November.
The processor also said that, so far, there had been many changes in course at both Apple and the two big card networks - Visa and Mastercard - where today’s directive may be countermanded by tomorrow’s activity.
“The information we get changes every day,” said the executive.
What also is known is that, in offering Apple Pay to members, a credit union has to be prepared to absorb significant costs. Apple, sources said, wants 15 basis points on every credit card sale, and five bps on every debit transaction.
Visa and Mastercard also want fees for the “tokens” they will provide to enhance Apple Pay security. With tokenization, the card number is stripped out and replaced with a randomly generated number that would be valueless to a hacker.
The process is sophisticated; it won’t be cheap. Indications are that there will be a fee – seven cents origination fee per token, $0.0025 monthly fee per active token, and $0.0015 per converted token transaction at Visa, sources said.
Mastercard, they said, will charge $0.50 per token issued, plus $0.10 monthly fee per issued token.
Another downer: so far there have been scant indications of enthusiasm for Apple Pay from some merchants.
“I have seen little or nothing from merchants,” Greg Garson, a financial services expert with Boston-based consulting firm High Start Group, said.
There has been much product touting from Apple, some from the initial financial institution partners, but there has largely been silence from retailers. That may be crucial.
Garson said that there are no indications merchants have trained their staff in how to deal with iPhone 6 tapping customers, so Monday may well strain many retailers.
Merchant indifference is pinpointed by some experts as the primary cause for the stalled starts of other mobile payments tools such as Google Wallet and the cellular carrier-owned Softcard (formerly known as Isis).
Even so, right now, few are predicting Apple Pay will stall but there are many fingers crossed in the hope that Monday’s launch will be a smooth one.