Who’s On First with Apple Pay Matt Pfaltzgraf Bob Steen SHAZAM Product Manager President & CEO, Bridge Community Bank ©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
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Who’s On First with Apple Pay Matt Pfaltzgraf Bob Steen
SHAZAM Product Manager President & CEO, Bridge Community Bank
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Apple Pay — What is it?
Apple Pay announcement: September 9, 2014
Apple’s version of a mobile wallet
Uses near field communication (NFC) technology
Wave your iPhone 6 model over a contactless reader with your finger on the TouchID
No need to open an app
Requires an initial enrollment process using the Passbook app
Uses tokenization as added payment security
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Source
Apple Pay — Future Potential
Apple’s brand loyalty and strong reputation will definitely add legitimacy to the mobile wallet
As merchants upgrade equipment for EMV®, they will likely include NFC compatibility, too
Apple Pay’s fingerprint ID and tokenization to address security
Apple Pay reinforces support for NFC and EMV contactless in the marketplace
* PaymentsSource – Sept. 2014
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Tokenization
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Tokenization
Token fundamentals
• Process of replacing original payment credentials — primary account number (PAN) — with a unique alias or alternate identifier which may be subsequently used to initiate payment
• It provides a static replacement for the PAN
SHAZAM will be supporting Apple Pay and tokenization for both Visa® and MasterCard®
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Visa Transaction
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
SHAZAM Transaction
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
What it Means to Your Financial Institution
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Agreement Highlights
Reporting
Interchange fee
Tokenization fee
Collection of fees
Participation requirements
Potential audit implications
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Reporting
• Submit twice annually accounting to Apple to verify the fees it owes the company
• Issuer is subject to an audit if Apple isn’t satisfied with reporting
• Issuer must also submit “frequent reports” to Apple giving its cards’ Apple Pay transaction statistics
• Apple requires issuers to produce, through the card network, nearly three-dozen categories of quantifiable information
• Number and dollar volume
• Credit and debit activity
• Average ticket
• Top 100 merchants by charge volume
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Interchange Fee
Visa and MasterCard will collect Apple’s share of interchange income and gather operational data
Credit card transactions: participating issuers will pay 0.15% of the transaction amount
Debit card transactions: participating issuers will pay $0.005 per transaction
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Tokenization Fee
Issuers will also pay tokenization fees to Visa and MasterCard to tokenize their cards
MasterCard: $0.50
Visa: $0.07
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Collection of Fees
Issuers will not pay Apple directly, but will pay their card network, which will pass the fees on to Apple
Issuers will receive an invoice each month from the network and will have 15 business days to pay
Issuers are barred from recovering any Apple Pay costs from cardholders in the program and must absorb their own development costs stemming from their participation
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Participation Requirements
Apple requires that at least 95% of the cards in their portfolio are branded by a participation network, such as Visa or MasterCard
The agreement specifies certain types of cards issuers may exclude from this calculation including, ATM-only, gift cards, Health Savings Account cards and commercial cards
“No Warranties. EXCEPT AS EXPRESSLY PROVIDED HEREIN, APPLE MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE APPLE PAYMENT PLATFORM OR ANY RELATED PRODUCTS AND SERVICES CONTEMPLATED BY THESE TERMS AND CONDITIONS”
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Potential Audit Implications
Apple may request no more than twice a year a written certification that the amounts are accurate
If Apple disputes the certificate, it’s allowed once each year to hire an external auditor to go verify the issuer’s Apple Pay records
If underpayment exceeding 5% is found, the issuer will have to pay the auditor’s fees
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Adoption, Usage and Wallet Composition
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Apple Pay Demographics
Copyright © Phoenix Marketing International 2015
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Apple Pay Users
Copyright © Phoenix Marketing International 2015
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Apple Pay Wallet by Type of Card
Copyright © Phoenix Marketing International 2015
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Apple Pay In-Store and In-App Purchases
Copyright © Phoenix Marketing International 2015
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Samsung & Loop Pay
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
New Entries
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
Thank you! QUESTIONS?
©2015 SHAZAM, Inc. Proprietary & Confidential. Information is of general applicability and current as of date of presentation.
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