Juniper Research: Apple Pay cracks ‘vicious cycle of indifference,’ to drive NFC market adoption

“After a decade where NFC (Near Field Communications) has suffered from what Juniper Research called a ‘vicious cycle of indifference,’ the company expects this month’s launch of Apple Pay to boost the technology in the US market,” Jack Schofield reports for ZDNet. “In a white paper, Juniper says: ‘We would now argue that Apple Pay will not only drive, but will create a ‘halo effect’ towards contactless payment in general. We still believe that in most markets this will primarily be driven by contactless card transactions, but that the greater awareness of handset contactless payments that Apple will generate will, in turn, result in an uplift in adoption and usage.'”

“Juniper had been pessimistic about the market after the dismal showing of the NFC-based Google Wallet, launched in 2011, and Apple’s failure to include NFC in the iPhone 5,” Schofield reports. “With the arrival of Apple Pay, based on industry-standard EMV contactless protocols running over NFC, Juniper has changed its view.”

Apple Pay has significant advantages over the unsuccessful Google Wallet. “Instead of the smartphone connecting to a cloud-based server to get the token that is used in the payment process, the Apple Pay token is generated on the smartphone, using an embedded SE (Security Element). This is faster and more secure,” Schofield reports. “Apple also uses its fingerprint-based Touch ID for authentication, as opposed to typing in a four-digit pin.”

“A third advantage is increased privacy. When someone makes a purchase using Apple Pay, the retailer only sees a token, and does not know which card or bank has been used. The retailer can’t store bank card details, email addresses or passwords: it does not have them,” Schofield reports. “This is a disadvantage for the retailers and for companies such as Google, because it stops them from tracking purchases and using the information for loyalty card schemes.”

Read more in the full article here.

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21 Comments

  1. I wish people would quit repeating the same mistake. Apple pay does not preclude the retailers from tracking purchases, you get a receipt right? It precludes them from harvesting personal information, PERIOD. They still know what is purchased, how much is purchased, they just don’t know WHO purchased. They just can’t sell your personal information or tie what was purchased to YOU and then sell that information.

    1. It’s assumed that “tracking” implies YOUR purchasing habits. Obviously stores must maintain some sort of inventory tracking system, so of course every transaction is saved.

      However, it is still possible to track your card; the “token” or Device Account Number is always the same (for each card) and could be used by merchants to track all the transactions made with that card via ApplePay.

      1. Apparently it is NOT the same. According to a description of the way it works, the token is randomly generated at the time of the transaction, but the bank actually knows it is you. Meanwhile, for the merchant, every transaction paid for with Apple Pay looks like a first-time purchase of a new customer.

        1. The security code is randomly generated for each transaction, but the token that is used is assigned to your device when you add the card in passbook. Each card gets its own token (Device Account Number). Just as your credit card numbers are sent with each transaction, so is this “token”. It’s the cryptogram (or security code) that is sent along with it that’s dynamically generated each time ApplePay is used.

          The cryptogram is used to determine that the DAC is coming from the actual device, much in the same way that you’re required to enter the CCV to verify that you have the card on hand and not just using a CC number you picked up somewhere.

          Once it is decrypted and verified, the request is sent off to the appropriate financial institution for authorization. That institution then does their own level of decryption and determines which actual account the DAC is linked to and then authorizes if the transaction may proceed.

          1. Does the truth hurt or something?

            The article I read was from a site called Bank Innovations and the author of the article spoke with someone from MasterCard to detail how the whole process works.

            It also goes on to talk about how Apple was able to secure lower transactions fees.

    2. Dave, the retailers could still track your purchases without the Pay system, they simply have to create a Passbook loyalty card for their organization (or their own APP). If the MCX (Merchant Customer Exchange) wants to create a common loyalty card for all their members, they could do that, or could share (behind the scenes) the customers purchase history AND any personal information that they gather. As you suggest, they could even match up the customers loyalty card with their credit/debit card number. This would even work with customers that used their loyalty cards (physical or virtual) and Pay.

      The actions of RiteAid and CVS will backfire and could even give Apple and Google a legal excuse to block the CurrentC app from their respective app stores. That would effectively kill the CurrentC program.

      Both systems can co-exist, they just need to stop fighting each other (let the customers decide which system to use). Hopefully the customers will decide to protect their own privacy and will use Pay.

      If the MCX retailers want to avoid the Credit Card transaction fees, they should offer a discount for using cash. Corporate avarice and greed will be the death of them.

      1. Retailers are usually prohibited form discriminating against credit card customers. Most merchant account agreement require retailers to ALWAYS charge the same amount for cash transactions and credit card transactions (in other words, retailers are required to absorb the transaction fees). If they offer discounts, they must be for all types of payments (cash, cards, cheques, gift cards, vouchers, etc).

  2. The sad part is people in the future will be using their (non Apple) devices in the future to make NFC purchases not realizing that they don’t have the same security and privacy they’ve been reading about with Apple’s devices.

    1. We have debit cards here, but I do not believe they come with the same consumer protections they do in Europe.

      I opted for an ATM-only (PIN only) card because debit cards do not have the same fraud protection that credit cards have here.

      IOW In the event of fraud on a credit card, the thief steals the bank’s money I never have to pay. With a debit card, the thief steals MY MONEY I have to get back from the bank. There’s a world of difference.

    2. I have a debit card, here in the USA. But they have their deficits, as MacSmiley pointed out. It’s also common for FEES to be gouged into one’s bill when using debit cards. You’d think not, but yes the are!

      These days, I use my debit account via PayPal because they offer customer protection with purchases with no fees (to me that is). If I’m going to buy stuff IRL I prefer cash. I am entirely biased against anything involving DEBT because DEBT is being used in the USA as instrument of enslaving citizens into what equates to indentured servitude, all part of the rush toward Neo-Feudalism as part of a new dark age. That’s not a good thing.

    1. @synth:
      Neither “vicious” nor “apathetic” would be appropriate. Vicious refers to deliberate violence, where as apathetic makes the clause redundant. A “cycle of indifference” would suffice. However, I believe the author is trying to grab the reader’s attention. Just my 2 cents.

    2. “vicious circle” is an idiom for a negative feedback loop. For example, nobody uses NFC because there are no terminals and there are no terminals because nobody uses NFC. I assume that a vicious cycle is the same thing.

  3. After a decade where NFC (Near Field Communications) has suffered from what Juniper Research called a ‘vicious cycle of indifference,’

    WHY? Because NFC was being done WRONG.

    Apple does NFC RIGHT. That’s the difference.

    I dearly hope that Pay does NOT inspire a ‘halo effect’ of BAD NFC. We’ll see! If it happens, it will make Pay look all the more amazing.

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