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Adopt Apple Pay? Not so fast!

Hold the phone … literally! Is there a worm in Apple Pay for banks?

Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission. Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission.

Don’t be so quick to start offering your Apple Pay to your debit card customers.

That’s right, Apple Pay is not that good of a deal.

There are some fundamental aspects of the vendor-financial institution relationship you should consider before you start drinking the Apple Juice!

Phones into payments

The key differentiator between Apple Pay and other offerings is that the iPhone is widely popular. Estimates have Apple selling 700 million phone worldwide since the products’ inception. Not bad given that Apple started selling the iPhone in 2008, all of which used the iOS operating system.

Now compare that to the Android market. No other manufacturer has that kind of mass in the market place. Apple owns the global smartphone market and they are using this advantage to thrust themselves into the payment space.

Enter the iPhone 6. All iPhone 6 and 6 Plus phones include an NFC chip. That chip enables the smartphone to communicate with NFC-configured point of sale terminals.

So, instead of a debit card with an NFC chip, all you need is Apple. Any debit card can be loaded on the Apple Pay App providing the financial institution is enrolled with Apple Pay and executes a contract with Apple.

As older iPhones are replaced with the iPhone 6 and beyond, the payment system mass of the iPhone will absolutely crush the competition.

Mass and scale. Ask yourself, how many global financial institutions have 700 million customers? The US Census bureau estimates the world population in 2015 at 7.2 billion.  On a one-to-one relationship (individual to iPhone), Apple has their product in the hands of almost 10% of the world population. We should not be as concerned with Wal-Mart as we should be with Apple! They are clearly taking over in a big way.

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Apple is in the process of establishing a global payment system using their smartphone platform. As older iPhones are replaced, the global financial clout of Apple will expand exponentially. Say goodbye to Money Tree and Lending Tree and say hello to the Apple Tree.

Apple Pay is just the starting line in the race. Next Apple will take your customers’ card use data (which the Apple Pay contract Apple can) and will use this data to market to your customer products and services based on their card purchase behavior.

Fast forward: Apple, ultimate disruptor

Here is the scenario … Apple using your data!

“Oh, we see you’re buying building materials for your home, would you like an Apple Pay Home Equity Line of Credit or perhaps a re-finance option?”

Yep, it is a lot more than just using the smart phone to buy stuff.

It is the key to taking your customer away from your institution. Autos, travel, even the apples you buy at the grocery store will be subject to the data mining activities of Apple Pay.

To sign the contract and let Apple Pay run free with your customers is not a good plan. Financial institutions need to clearly read and understand the Apple Pay contract.

Apple gets it, banks don’t!  And in all senses of those words.

Don’t get left with the pits

While you provide a popular convenience to your customers, financial institutions also need to have monitoring tools and marketing countermeasures in place to protect your institution from being picked clean of all of your customers.

Yes, the smartphone is the de facto platform of choice for the Digital Native and a mobility based life style, but Apple Pay may not be a smart idea for financial institutions.

—The Wombat!

Do you agree with the Wombat? Or do you think he’s too sour on Apple? Share your view in the comment section below.

Dan Fisher

Dan Fisher is president and CEO of The Copper River Group, a consulting firm headquartered in Fargo, N. D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He was CIO of Community First Bankshares (now part of Bank of the West), has served as a director of the Federal Reserve Board of Minneapolis, the chairman of the American Bankers Association Payment Systems Committee, and was a member of the Independent Community Bankers of America Payments Committee. Fisher has written numerous articles on banking technology and the payments system. He has authored or co-authored six books and recently published a book titled, "Capturing Your Customer! The New Technology of Remote Deposit." You can contact Fisher at dan@copperrivergroup.com or at 701-293-6222.
P.S. To understand Dan's nickname, check out "About the Wombat" on his website.       

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