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In commenting on the Apple Watch and Apple Pay, we were impressed by Apple’s gaining support, right out of the box, from the leading credit card networks. (“Apple Watch Foreshadows New “Personal Cloud” Platform” 9/12/14). We spoke with Jorn Lambert, Group Head of Emerging Payments at MasterCard about their perception of the attributes of Apple Pay.
Lambert lists three key attributes that his company looks for in a digital (non-plastic) solution: 1) high level of security; 2) rapidly scalable to millions of devices; 3) good user experience. He states, “If we don’t offer digital solutions with these three characteristics, someone else will. Cash is our enemy.”
He emphasizes the security features of Apple Pay. When the user adds a new credit card to their iPhone 6, a unique Device Account Number is assigned and stored in the Secure Element. (The Secure Element is “a dedicated chip” in iPhone.) Lambert points to the fact that the Secure Element doesn’t contain the user’s actual card number or other information, but rather only tokenized data. For each transaction, a “transaction-specific dynamic security code” and the Device Account Number are the only information that is transmitted.
Lambert also notes that the adoption rate of NFC (near field communications) has been spotty and that Apple’s endorsement, in connection with Apple Pay, will greatly accelerate NFC adoption. He points out that EMV is coming and will cause conversion of terminals by October 2015, and that these new terminals will be NFC-capable. (EMV stands for stands for Europay, MasterCard and Visa – the technology includes a chip on the card, which is read for authentication at the time of a transaction; it also generates a one-time security code. The driving momentum behind EMV is that after 10/1/15 stores that don’t implement the technology will be liable in the case of fraudulent transactions, rather than the issuing bank being liable.).
MasterCard also announced that Apple Pay will be integrated with its own MasterCard Digital Enablement Service (MDES) and that, “In addition to the banks announced today by Apple, MasterCard is working … to bring additional banks on board quickly through [MDES].”