What Apple Didn’t Say That Acquirers Should Have Heard

Last week’s Apple WWDC keynote has prompted a bunch of Monday morning quarterbacking with respect to Apple’s plans for devices, software and even payments. Although Tim Cook’s and Craig Federighi’s keynotes were devoid of any direct reference to how Apple would pursue “payments,” (even disappointing many who were “dead certain” that NFC would be called out as a key technology), what Apple didn’t say, I think, left more than enough clues about how it might pursue its payments and commerce ambitions.

Those clues point to some pretty cool innovation for payments overall, but a potentially pretty big disruption to one aspect of the payments industry that is trying to reinvent itself to stay relevant– acquiring.

The big disruptor won’t be Apple directly but the ecosystem that Apple has created over the last seven years and empowered to use its tools and technologies and incentives to unleash entirely new sources of value for merchants and consumers. The by-product of that ecosystem has the potential to throw a pretty big wrench into the plans now on the acquiring industry’s drawing boards.

If you don’t believe me, just take a peek at two big sectors that Apple pretty much blew up last week in the space of its two hour WWDC keynote.

Lots of people were really confused when Nike abruptly ditched its Fuel band product line. Sure, Fuel bands were an offering in a rather competitive market of health and fitness smart devices, but the popular swoosh-y well-known brand was behind it. At one point, there were even lots of rumors circulating about some of the things on Nike’s Fuel roadmap, including issuing virtual currencies pegged to fitness goals which would be converted to real money to buy things via the Nike Fuel app.

But my guess is that Nike must have gotten wind of Apple’s plans for health and fitness, something we all saw unveiled for the first time last Monday, and decided it was game over for Fuel, at least as it was originally envisioned.

Healthkit is the SDK that Apple will use to unleash a wave of innovation in the health and fitness arena – innovations in the form of apps that will work across all of Apple devices. And although Apple didn’t talk specifically about a smartwatch last week, I’d bet my shoe collection that we’ll see something like that this Fall.

Apple has completely up-ended the entire health and fitness market, forcing a reset of the plans of every player in it.

Healthkit is classic Apple. It will empower thousands of developers to create apps that will be made available to Apple OS customers. Millions of customers will download those apps and buy more Apple devices to run them on – devices that they sell and make mega-margins from.

The big point though is that Apple isn’t creating the health and fitness market all by its lonesome, it’s turning over the keys to lots of innovators who will make the Healthkit platform and ecosystem valuable to consumers, developers, and Apple. It’s the ecosystem that Apple is enabling that will actually make Apple a formidable competitor in that space and a very sticky product.

Now, let’s turn to the home monitoring market.

Homekit is the SDK that Apple released last week to enable all sorts of things to happen magically in the home. The use case that Federighi described goes something like this: Users authenticate themselves via TouchID and then via Siri, give commands to the house to do stuff. “Go to bed” can be enabled via an app to turn off inside lights, turn on outside lights, turn down heat, set house alarm, set alarm clock for 5AM, set coffee maker to come on at 4:45 AM, etc.

It’s now up to the imaginations of thousands of innovators to use Homekit to create apps, powered by Apple and enabled by its own hardware and operating system—an operating system that now ports important functions across all the Apple devices a household owns. In the space of another 15 minute segment of the WWDC keynote, Apple totally forced a reset of the plans of everyone in the home management market with similar ambitions.  I’d sure hate to be selling Comcast’s XFinity Home right about now, or even NEST (well, actually Google, which paid $3.2 billion for this Internet-based home devices start-up).

So what does this have to do with payments and acquiring?


Everyone in the traditional acquiring business has bet the farm on transforming themselves into solutions providers with value-added apps that can be sold to merchants. Everyone in payments, not just acquiring, has come to the realization that payment acceptance is no longer a product that merchants value as much as they once did, and therefore, want to pay as little as possible for. Staying relevant and profitable is about monetizing a value-added set of solutions that help merchants run their businesses – attract new customers, keep them loyal, manage their back office.

Except that over the years, Apple has created a pretty attractive ecosystem of apps and app developers and hardware that merchants of all sizes find pretty attractive and use – and that innovators have made even more attractive by producing lots of new things that add value to merchants. That attractiveness became even greater with the launch of iBeacon last year and the ability for merchants with iOS devices to communicate with consumers carrying around the same. Last Monday we also heard Apple announce that it would make its TouchID available to third parties, just the latest set of assets alongside of its Passbook “wallet” functionality and its mega asset of 800 million iTunes accounts with registered payments credentials waiting to be commerce-enabled.

The only thing that Apple, and the ecosystem it is enabling, really needs traditional acquirers for is exactly what they don’t necessarily want to be used exclusively for – payments processing. Value-added solutions from acquirers may not be eliminated entirely, but could potentially be pretty severely gutted the larger and more powerful and more compelling their ecosystem becomes.

Yes, I know what you’re saying. Apple is such a small piece of the smartphone ecosystem. POS terminals need to be secure and iPads aren’t suited to commercial payments use. Android is the predominant smartphone operating system and will, therefore, end up being the dominant merchant POS platform as POS becomes more and more about integrated tablet solutions. There are more smartphones running Android and lots of POS devices operating that platform too. Beacons can be also used with Android devices and there are lots of POS ecosystems are now popping up all around running Android.

I hear you.

But, as I said last week, it’s just too hard to reach a critical mass of consumers with apps running on Android. Fewer than 30 percent of consumers have the most current version of the Android operating system on their smartphones and not even two-thirds have the next-to-the- latest version. Until Google and Android solves its fragmentation problem, developers have and will continue to write to a platform that gives them the most bang for their development buck and that’s Apple.  And with fewer consumers running around with Beacon-enabled Android apps, fewer merchants will be interested in supporting it and fewer developers interested in creating more apps for it.

But, perhaps more importantly, when it comes to commerce, merchants running an Android-based POS system will miss the chance to get in on whatever commerce-enabled opportunities may come along with Apple’s 800 million digital iTunes accounts. Google Wallet doesn’t have enough users to interest merchants to go to the trouble (plus it has that pesky you-are-only- after-my-data stigma with merchants), so even if the playing field around apps and Beacons was equal – Apple’s trump card is its 800 million iTunes accounts, which many people probably use a lot. That’s an enormous barrier to entry and hard for all but a few to replicate or overcome. Google isn’t on that list, at least not now.

But more importantly, point of sale is no longer a particular counter in a store.

One of the biggest disruptions that Apple and its ecosystem is driving is how and where transacting really happens. Beacon brought this to life last year in the physical store environment by allowing consumers to ‘check in’ via Beacon and to ‘check out’ via payments credentials activated by Beacon.  But suppose some clever innovator was inspired by Apple’s Homekit use case and decided to apply that to commerce.  Suppose Apple devices and apps allowed consumers to scan items as they were being put into a shopping cart, keep tally of the dollar amount of the stuff loaded into the cart, display the running tally on the lock screen in real time and then initiate payment via a voice command “to pay” that authenticated the consumer via TouchID on their Apple device. An iTunes account linked to a card on file running over a white labeled network completes the purchase.

All of this could happen without a POS system in sight. An Apple ecosystem would have enabled all of this functionality with acquirers doing what they’ve always done – processing the payment.  Crazy? Sure, but that’s probably what people would have said about using a phone to turn on their oven or run their heating and air conditioning systems remotely or to check in at the airport.

Apple’s history is to enable and empower an ecosystem that it can control and monetize. It has captured the interest of merchants by captivating consumers to buy its devices and download apps that innovators use the apps store to get distribution for those apps. Its point of sale innovations are simple and easy to use, and help merchants stay innovative by making it easy and inexpensive to tap into the latest technologies via the steady stream of new apps that innovators crank out. With Apple’s announcement on Monday, these apps can now easily extend to every single device that they operate and own.

So, Apple and its ecosystem is now in position to drive the on- to offline play around commerce with the ecosystem that it has methodically created and inspired – apps, apps store, promotions via iBeacon, “wallets” via Passbook, digital payments via iTunes. And this ecosystem won’t disrupt payments by becoming a payments player in the way we think about payments today, it will disrupt payments by using its ecosystem and its assets to reinvent it.

One of those disruptions could come when all of these pieces are mobilized by someone to create a robust consumer-merchant centric marketing platform for which payment is just one piece that comes at the end.  In this instance, the purchase of products and solutions is triggered by targeted and personalized offers and promotions all powered by  Apple devices in the hands of merchants and consumers that talk  to each other in a safe and secured ecosystem monetized by Apple, including payment via its 800 million iTunes accounts.

As we’ve seen over the years, innovators will then be even more motivated to develop merchant-specific apps to solve different pain points for different segments of the merchant community. And, as the iBeacon ecosystem evolves and more apps and more Apple-powered devices emerge, it’s likely that more iOS/OS powered “point of sale” systems – whatever they look like – could start to emerge too. Merchants won’t think to look to acquirers for those solutions, they won’t have to. They’ll be presented with those options via an ecosystem powered and controlled by innovators that will give birth to them.

So, the big question for traditional acquirers is where they can and should play in order to add value to merchants who will be presented with an entirely new way of interacting with customers and running their businesses.

What we saw last Monday was convincing evidence of how powerful ecosystems can be when they put the right tools and technologies in the hands of thousands of innovators eager to unleash new sources of value and make money. Sure, you’re saying, but payments is different, or they can’t do what we can do because payments is too complex. That’s  what every industry challenged by disruptive technology tends to say.

In the last two decades we’ve seen the Internet and the cloud slowly but surely roll over industry after industry. If anything, the process is accelerating.  Just look at the sorry spectacle of print newspapers and the flail that is taking place at the big publishers all over the world who are trying to stop the bleeding.

Ultimately, acquiring is based on software and communications.  Unfortunately, that’s the sweet spot for Apple and other Internet giants.  Acquirers will need more just a plan that talks about their vision for delivering value-added solutions to merchants. They’ll need one  that considers how to thrive within this potentially new and powerful ecosystem that won’t take over the world tomorrow, but will surely influence how it operates in the years to come.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.