I saw a lot of comment on an article in Harvard Business Review that discussed Apple Pay and concluded that it is not a disruptive play.

By launching Apple Pay as a reseller instead of as a disruptor, Apple is helping to perpetuate a credit card payment system that is obsolete, overly expensive, and absolutely unnecessary in the present day.

[From Apple Pay Is Just a Big Giveaway to Credit Card Companies – HBR]

Well, that’s a little harsh and I’m not sure I’d agree that credit cards are obsolete, but you cannot help but agree with the core point about Apple Pay not being a disruptive technology. I’m hardly the only the person that thinks this and it’s not a new perspective. ApplePay is not disruptive because it cements in place the existing rails for retail payments. And there are good reasons for doing that (apart from anything else, they work) and it means that the service has immediate access to a mass market.

But truly disruptive new services don’t just digitize the familiar. They do away with it.

[From What Amazon, iTunes, and Uber teach us about Apple Pay – O’Reilly Radar]

This is a fair point. Apple Pay is certainly digitising the familiar rather than doing away with it.

In each of these cases, my payment information is simply a stored credential that is already associated with my identity. And that identity is increasingly recognized by means other than an explicit payment process.

[From What Amazon, iTunes, and Uber teach us about Apple Pay – O’Reilly Radar]

The point is, of course, that in time services like Uber will use Apple Pay, because they will want to switch from using stored payment card credentials under “card on file” rules and rates and instead use “cardholder present” rules and rates. This will turn all payments into push payments (which is a good thing) and greatly benefit retailers and consumers alike. What will vanish is the idea of a “point of sale”, since even in-store all payments will be made in-app, just like Uber.

Apple Pay optimizes for how the world does work. The real winner in payments will build for how the world should work.

[From What Amazon, iTunes, and Uber teach us about Apple Pay – O’Reilly Radar]

So how should payments work? Well, that depends on who you are. But if you are a merchant, for example, you want the money to come directly from the customer’s bank and into your bank (forget about what “bank” might mean for the moment) with no-one else in the loop.

Banks don’t orchestrate commerce… they are a dumb pipe payment service that cost far more than the value they provide. The greater they work to control the existing pipes, the greater the business case is for going around them, or regulating them into submission.

[From Money 2020: Tokens and Networks | FinVentures]

Tom’s typically robust approach may aggravate some but there’s no denying that he has an informed perspective. Unless banks find some added value (spoiler alert: I have a feeling that this may be something to do with identity) then they won’t get anything out of this either. Time to start developing a strategic response to falling net interest income, transaction fees asymptotic to zero, flat trading income future. Right now, only 7% of European bank revenues are “other”, so it’s time to grow this piece of the pie…

Euro Bank Income 2014

European Bank Revenues 2014 (Source: Deutsche Bank, March 2015).

If we’re being disruptive, then we don’t start with Apple Pay, we start with thinking about how payments should work. Broadly speaking, wow payments should work is how Bill Gates said they should work in his closing address to SIBOS 2014. He said:

What should the marginal cost of a transaction be, if the identities are properly established, it is extremely low.

Not my words: Bill Gates’. This is a perspective that suggests a very positive model for disruption around a new role for banks in the wider economy. The banks role is to reduce the marginal cost of everyone else’s transactions as well as their own by delivering the trusted identification with strong authentication that the new economy demands. This means more transactions, more commerce, more prosperity and a decent line of business for the banks themselves.


  1. Every identity play I’ve seen in a vendor or in a bank is still wrong. Yet to see something compelling or that feels right.

    Mostly because in the 1970s we computerised paper, but didn’t remove our reliance on it.

    Now we’re progressing more and more towards digitising the same old paper context.

    It’s like using a smart phone to call Amazon to buy something.

    It just feels so very wrong.

    Identity isn’t something the government gives me… or at least it SHOULDN’T be. It’s a collection data showing me persistently and uniquely being me. That I own.

    We need a page rank for identity and a globally indexable dataset or 10 to work from.

  2. Dear Mr Birch,

    I think it is, at least at the level of mentality shift. It has shown that a non-banking mobile ecosystem has the capability to implement its secure element thus facilitating transgression from plastic to virtual cards. Iphone 6 is a fully fledged payments tool and more developers take it to the next level. Irrefutably, it has proved its point, that of having a say in the payments industry. Hats off to Apple in this respect.

  3. Some good points made here. I noted your comment ” What will vanish is the idea of a “point of sale”, since even in-store all payments will be made in-app, just like Uber.” I would say that maybe the concept of a physical/static POS may vanish, but it would be plausible to consider the app itself to be a mobile ‘point of sale’.

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