Apple Pay, Passbook, and CurrentC from MCX

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September 18, 2014

Apple Pay, Passbook, and CurrentC from MCX

  • The implementation of Apple Pay through the Passbook app (so that banks, having provisioned the credentials of a card customer into an iPhone, cannot access these credentials directly from their own mobile apps) positions Passbook as a repository of digital payments content (such as loyalty balances and e-coupons) in a similar way that iTunes is a repository of digital entertainment content. Beyond increasing the consumer cost of switching from iOS to Android, this is consistent with Apple’s vision of enlarging iOS to provide workflow and marketing solutions for enterprise customers.
  • Passbook is already a marketing channel for retailers, particularly in the travel-segment, who have Passbook-enabled their apps and gift cards. Apple Pay extends the utility of the Passbook app from these gift cards to network-branded cards so that the earning and redemption of loyalty rewards can be integrated into the core payments stream (in the same way that customers can split a ticket between a primary funding account and loyalty balance when shopping online at, for example,
  • While Apple has been clear that it will not look to leverage payments data, this does not preclude storing loyalty balances subject to consumer opt-in. Indeed, a key feature of Passbook is its ability to manage the app clutter that would otherwise arise from consumer enrolment in multiple loyalty programs by consolidating the associated rewards-balances in a single app whose location-sensitivity enables the relevant program to be “popped” to the lock screen while a consumer is in-store.
  • The integration of payments and marketing that Apple Pay has enabled through Passbook will be an important driver of consumer and merchant adoption. Merely replacing a card swipe with a ‘phone tap has not been enough to engender meaningful activity in mobile payments, but TGT has demonstrated that rewards program can significantly change consumer behavior with Target’s proprietary RED cards now accounting for 20% of tender in US stores. We note that Macy’s has already announced in-store support for Apple Pay along with an expansion of its iBeacon program to offer location-specific rewards to consumers.
  • The implementation of Apple Pay through the Passbook app also means that Apple is able to brand the consumer payment experience on an iPhone; direct access to the secure element and NFC radio is denied to competing payment apps. Having established Apple Pay as a brand, we expect Apple to broaden payment methods (to ACH and private-label credit cards, for example) and interfaces (to quick response or QR barcodes, for example). This will position Passbook to accumulate loyalty-balances regardless of primary payment method and open up the possibility for an integration of Apple Pay with the CurrentC app to be rolled out nationally in 2015 by the merchant payments consortium, MCX.
  • We acknowledge a number of MCX merchants, including WMT and BBY, have explicitly stated they will not be accepting Apple Pay. This is because Apple Pay, in its current form, largely ports the current structure of the card payments industry into a mobile environment including, in particular, the high-cost of network-branded credit cards and the risk of data leakage into the Visa and MasterCard systems. To address this, MCX merchants have agreed not to accept competing mobile wallets and are not activating the NFC capabilities at point-of-sale on which many of competing wallets, including Apple Pay, depend for the transport of card credentials; rather, CurrentC will use QR barcodes.
  • While this use of technology to restrict consumer payment choices may be appropriate in the early stages of brand-building for CurrentC, it will ultimately fail because of the risk of lost sales to consumers who insist on using NFC-enabled wallets and because the branded networks will respond by extending the EMV standard to include QR-transport. In practice, this means merchants will need to win the steering battle for CurrentC over network-branded alternatives and, once they feel confident the CurrentC brand is sufficiently established for this, will become more comfortable with “open” wallet solutions. A particular advantage of integrating Apple Pay with CurrentC will be to avoid the confusion inherent in current Target policy, for example, whereby customers will be able to use CurrentC within the Target mobile app for checkout on but not for checkout in-store.
  • The reason CurrentC can win the steering battle for customer use against network-branded cards in an open wallet is that merchants are advantaged providers of rewards. For example, Target can afford to provide a 5% discount (versus the 2-3% reward that is potentially available on a premium credit card assuming complete pass-through of merchant fees to cardholders) for three reasons. First, the 5% reward is associated with the Target brand while a typical network-branded card reward is associated with the bank brand and so does not generate the same lift to the retailer in terms of customer loyalty, visit frequency, and average ticket amount. Second, given a gross margin of 70%, the cost to Target of its discount is 3.5% not the value to the customer of 5%. And, third, the use of payments-data enabled marketing (particularly if it leverages the SKU-level data available only to the retailer) can meaningfully increase the spread between perceived value of the reward for the customer and the cost-to-deliver for the retailer. Indeed, given the ability to personalize real-time rewards on a mobile app, we see data strategy as increasingly important to the competitive success of retailers and agree with Don Schulman, head of enterprise at AXP, when he says “data is the weapon”.
  • This note looks more broadly at the integration of payments and marketing as the US card industry responds to security-concerns by shifting from using a magnetic stripe as a storage medium for account credentials to using a chip (whether on a card or in a phone). The impact of this technology migration is to turn payment devices into digital marketing channels at just the time there is a secular shift in advertising from traditional “measured media” channels to digital channels. The resulting integration of payments and marketing will be a key component of: (i) the “app-and-mortar” response of traditional retailers to digital brands such as AMZN; and (ii) the bank response to the erosion of retail-franchise economics following the Durbin cap on debit interchange.
  • We see FIS, PAY, and COF as winners and expect retailers to take advantage of the debit-routing flexibility provided for them by the Durbin amendment to support alternative processing infrastructures to V and MA. In addition to the MCX solution, with FIS as its network partner, these alternatives will likely include direct-routing between larger retailers and banks enabled by new technologies such as that introduced earlier this year by ACIW.
  • The retailer motivation for, and commitment to, alternatives to Visa and MasterCard processing is summarized by the following quote reported on consultant Tom Noyes excellent blog[1]: “I think of Commerce as a highway, the payment networks are like a toll bridge. I don’t mind paying them $0.25 to cross the bridge [i.e. bank debit fees] but they want to see what is in my truck [i.e. concern with data leakage] and take 2-3% of what is inside [i.e. bank credit fees]. Hence, I’m looking for another bridge”.


The consensus view is that mobile will be challenged because a card swipe works well enough. While we understand this view if mobile payments are looked at in isolation (given forecasts for them to reach ~$100bn by 2017 in the US versus over $4 trillion on plastic – see Exhibit 1), we think there is a broader context around the integration of payments and marketing. This is likely to be a key element of the “app-and-mortar” response of retailers to digital brands such as AMZN, and of banks to the erosion of retail-franchise economics because of the Durbin cap on debit fees.

Exhibit 1: Representative Forecast for US Mobile Payments

Source: Business Insider

The general catalyst for the integration of payments and marketing is the security-driven shift from mag-stripe as a storage medium for card-credentials to a chip (whether on a card or in a ‘phone); the chip makes a marketing difference because of its ability to dynamically updating loyalty balances as consumers earn and redeem rewards and to integrate these activities into the payments stream. There are “tipping-point” effects in the adoption of chip-card technology (and, more specifically, the Europay-MasterCard-Visa or “EMV” protocol for chip-based payment devices) because late-adopting issuers will face disproportionate costs as fraud migrates to more vulnerable nodes in the system. As a result, industry estimates [2] are for 70% of US credit cards and 40% of debit cards to be EMV-compliant by end-2015.

Furthermore, issuer adoption of the EMV standard will catalyze merchant adoption because of network “liability-shift” rules specifying that, beginning October 2015, merchants (rather than issuers as is the standard for card-present transactions) will be bear the fraud risk on EMV-compliant payment devices if they have not installed EMV-compliant point-of-sale (POS) terminals. As a result, we expect an increase in the number of EMV terminals from 1.5mm at end-2013 to 12.5mm by end-2017 (or 90% of the total – see Exhibit 2) with some pull-forward effect in 2014 and 2015. The net effect is that EMV-compliant card purchase volumes will likely reach $1.5tn in 2017, far higher than ~$100bn on mobile phones, and representing ~one-third of expected total card volumes.

Exhibit 2: EMV-Compliant Terminal Penetration the US

Source: Business Intelligence, Aite Group

Already over 80% of shipped POS terminals in the US are EMV-compliant and, additionally, have NFC wireless capability. However, retailers can conform to the EMV standard without activating NFC-enabled contactless payments; in other words, they can avoid the liability-shift on fraud by providing EMV-compliant terminals for chip-cards (which are slotted into a terminal for a “contact” payments) even if the NFC radio is not activated to allow for tap ‘n’ pay “contactless” payments. Given phones cannot be slotted into a terminal, this means that acceptance of mobile payments does not necessarily follow from merchant adoption of EMV technology; and, for the reasons discussed below, some retailers including WMT and BBY have stated they will not accept Apple Pay as currently configured.

Retailing Industry: App-and-Mortar Response to AMZN

A cornerstone objective of the retailing industry is to respond to the competitive challenge posed by digital brands such as AMZN. The “app-and-mortar” response revolves around engaging consumers in digital channels including mobile and online, and integrating these channels with the store channel (whether, for example, by encouraging a shopper to use a mobile app to navigate a store[3] or to use a store to fulfil an online purchase). In this context, mobile payments are not about replacing a card swipe with a phone tap but about allowing a consumer to complete a shopping journey that may have begun and evolved on a mobile application.

There are clear motivations for both retailers and consumers to use mobile apps. For retailers, “omni-channel” engagement is associated with their best customers; Walgreens, for example, reports that customers who use the mobile app spend 4x the amount of non-internet walk-in customers with the ratio rising to 6x for customers who use both the mobile app and (see Exhibit 3). Furthermore, if consumers use mobile apps, retailers can more easily digitize workflows. Walmart, for example, has a “Savings Catcher” program where shoppers who scan receipt barcodes into the mobile app are eligible for an online credit if they have paid more than the price of any local competitor’s printed ad. The value for WMT is that it can use the resulting SKU-level data to personalize a shopper’s experience both in-store and online; for the consumer, there is reinforcement of WMT’s value brand and hard dollar-savings.

Exhibit 3: Reported Spend Lift from Omni-Channel Engagement at Walgreens

Once Walmart (through the CurrentC mobile payment solution that the merchant payments consortium, MCX, will roll out nationally next year) enables its app for payments, shoppers will not need to scan-in paper receipts since the workflows will be intrinsically digitized just as they are for AMZN. Beyond the consumer benefit of a digital receipt-tracking, WMT expects to using data to make the shopping experience more personal and targeted both in-store and online. The firm acknowledges privacy concerns but Gibu Thomas, head of digital channels, comments “if we save [customers] money or remind them of something they might need, no one says ‘wait, how did you get that data?’ or ‘why are you using that data?’; they say ‘thank you!’”

Finally, WMT expects to challenge AMZN in e-commerce promising that the combination of digital and physical assets will allow “an e-commerce experience equivalent to anyone in the world”, and to match AMZN in terms of online product range and shipping speed by end-2016. The firm adds that consumer use of its mobile app will generate a data and traffic advantage over the next few years given: (i) mobile “influenced” sales (where a shopper uses a mobile app for product discovery or price comparison, for example) will likely be double estimated e-commerce sales of $365bn as early as 2016; and (ii) that 50% of traffic on is already from the mobile app[4]. As Gibu Thomas puts it, “the possibility of bringing the web to the store is incredibly disruptive … we have 140mm shoppers in the US and that is internet scale in the offline world”.

In short, retailers have shifted from looking to limit consumer use of mobile for “show-rooming” to seeking to engage consumers with mobile apps and wiring their stores accordingly. TGT, for example, enabled its stores for Wi-Fi in 2012 and Macy’s announced on Monday expansion of its “iBeacon” program that allows consumers to access location-specific deals and recommendations while in-store (albeit through the white-label app of Shopkick which is one of several developers specializing in setting up iBeacon networks for merchants). Richard Fairbank, CEO of COF, summarizes the opportunity nicely “mobile can be the best opportunity to bring the tie [with the digital brands] back in the retailers’ favor when you think about the opportunity for real-time communications, real-time offers, for literally knowing where the person is in the store, for building loyalty programs, for point-of-sale and transactional ease and convenience, and ultimately all the data that can be collected there”.

Banking Industry: Restoring the Economics of Retail Banking after Durbin

A cornerstone objective of the banking industry is to raise ROE generally and, in particular, for retail banking where economics have been degraded by the Durbin cap on debit interchange. Implemented in October 2011, this reduced bank debit fees by 50% (from just over 50 cents/transaction on average to just under 25 cents) and has rendered approximately 40% of checking accounts unprofitable[5]. The impact of Durbin has been particularly severe because it coincides with rising compliance costs so that average annual revenue from a checking account, estimated at just over $400[6] now that debit fees have halved (see Exhibit 4), is converging down towards maintenance costs estimated by the American Bankers Association at $250-$400 depending on the compliance environment; obviously, these averages conceal wide variations by account with low-balance accounts less profitable than high-balance accounts.

Exhibit 4: Estimates of Unit Revenues for Average Checking Account

Source: StrategyCorps

Furthermore, Durbin disadvantaged covered banks in the core business of providing checking accounts relative to issuers, such as AXP and DFS, that are exempt from Durbin (because of vertical integration of the issuing and acquiring businesses and, hence, absence of externally-identifiable interchange). These Durbin-exempt issuers can offer products that are functionally equivalent to checking accounts (such as cash-back checking from DFS and Serve/Bluebird from AXP) and subsidize consumer pricing with unregulated merchant fees. For example, if the Chase Liquid prepaid card[7] offered the same features as Amex Serve (e.g. check- and ATM-access) it would be Durbin-regulated and limited to merchant fees of just under 25 cents/transaction while AXP charges approximately $1 (just over 2.5% on an average $40 ticket).

Large banks have responded to by using rewards to shift consumer spending from debit cards to credit cards which are not covered by Durbin and can attract bank fees of 2-3% of the transaction value. The shift is independent of whether a consumer needs credit at point-of-sale and shows up in the spend-to-lend ratio (i.e. the ratio of annual spending on a credit card to average outstanding loan balance) which has risen by over 30% from 2.3x in 2009 to 3.3x in 2013 (see Exhibit 5). Of course, the strategy is viable only for banks with strong credit card franchises and hence has contributed to the increased interest in credit cards at large banks such as WFC and the disadvantaged position of smaller banks which have not developed the risk-scoring capabilities necessary to manage default risk and adverse selection in the credit card business.

Exhibit 5: With Durbin, Banks Shifted Promotional Focus to Spending on Credit Cards from Debit Cards

Expect Payments Economics to Shift from Interchange to Data-Enabled Marketing

In practice, we believe this network-enabled, rent-seeking behavior by banks around credit-interchange is unsustainable. The retailer perspective is vividly summarized by the following quote reported on consultant Tom Noyes excellent blog[8]: “I think of Commerce as a highway, the payment networks are like a toll bridge. I don’t mind paying them $0.25 to cross the bridge [i.e. bank debit fees] but they want to see what is in my truck [i.e. concern with data leakage] and take 2-3% of what is inside [i.e. bank credit fees]. Hence, I’m looking for another bridge”. Retailer frustration at card-acceptance costs is not new but the shift in payments technology from storing card credentials on chips, whether in a card or ‘phone, rather than on magnetic-stripes provides them with a response that has previously been unable.

As discussed above, the significance of chip-enabled devices is that the processing power of the chip allows them to carry loyalty balances along with the credentials for the primary funding account and to dynamically update these loyalty balances as customers earn and redeem rewards. MasterCard summarizes the idea as follows: “EMV in the physical world is a much thicker pipe [than mag stripe] … not only is it a more secure transaction but you can add more data into the payments stream that can drive things like offers and receipts”. Put another way, chip technology turns payment devices into digital marketing media. The opportunity for payments companies as advertising shifts towards digital channels was noted as long ago as 2011 by American Express (see Exhibit 6) but chip-technology is a clear and present catalyst.

Exhibit 6: The Digital Commerce Opportunity as Reported by American Express

Source: American Express, August 2011

To update AXP’s estimates, we note that at last October’s Money 2020 conference Ed Labry of First Data quantified US marketing and advertising spend potentially available for new digital solutions at $500bn and compared this amount to total merchant fees on card products (i.e. excluding consumer fee and interest payments) of $70bn. This estimate of addressable marketing revenue includes trade-spend (presently running at over $200bn) with the balance comprising traditional measured media and direct advertising; the digital component is presently only $50bn but growing at double-digits while other categories are flat or down (see Exhibit 7).

Exhibit 7: Estimates for 2014 Advertising Spend

Source: Winterberry Group[9]

There are already indications of payment businesses with a primary focus on data-enabled marketing. For example, ADS is growing core card-spend volumes at 11% (versus 6-7% for network-branded cards) and extending its marketing- rather than interchange-based model from private-label to network-branded cards with the Virgin American portfolio. As another leading private-label brand (see Exhibit 8), COF has highlighted the “huge opportunity to really leverage information” and added that the “opportunity to leverage our own digital innovation in that [the retailing] space is very exciting to us”. Finally, in February 2013, JPM announced its ChaseNet private card-processing infrastructure with CEO Jamie Dimon explicitly referencing the opportunity to craft more merchant-friendly arrangements: “it allows us to go to merchants and strike our own [deals] with merchants; we just think it will be a better relationship between us and the merchant[10]”.

Exhibit 8 – US Private Label Card Business

Source: Nilson 1039

Apple Pay is a Catalyst for the Integration of Payments and Marketing

Apple Pay is a catalyst for the integration of payments and marketing because of its implementation through the Passbook app which we expect to evolve into a repository for digital payments content, such as loyalty balances and e-coupons, in a similar way that iTunes is a repository for digital entertainment content; in both cases, the impact on Apple is to increase consumer switching costs from iOS to Android by “locking” digital assets (with accumulated loyalty balances and rewards in the case of Passbook playing the role of songs in the case of iTunes). We note that while Apple has been clear that it is not collecting payments data (although it does capture these data for online[11], if not point-of-sale, transactions), it can and, subject to consumer opt-in, does store gift-card and loyalty balances in the Passbook app.

The drawback for banks of the implementation of Apple Pay through Passbook is that, having provisioned card credentials into an iPhone, banks cannot access them through their own apps; to this extent, their brands are subjugated by the Apple brand and we expect this to be important in the future as Apple, having branded a consumer payment experience, broadens payment methods (e.g. to include private-label credit payments and ACH-enabled debit payments) and interface (e.g. to include quick response or “QR” barcodes). We believe banks would have preferred a solution like that adopted in Android (through host card emulation or HCE) in which they can access card credentials directly from their own apps.

Against this, the benefit for banks of the Apple Pay implementation is that transfers the existing network rule-set, including premium interchange for credit products, from plastic cards to mobile payments; indeed, given iTunes accounts are disproportionately credit[12], Apple Pay will likely support bank efforts to shift tender from debit. The other benefit for banks of Apple Pay is that it can reduce their fraud losses because the finger-print risk-scores generated from TouchID improve authentication (i.e. provide banks with greater assurance that a request for a payment “token” against which a transaction will be settled originates from a legitimate customer). We believe the amount banks are paying for this token-assurance information from Apple, reportedly up to 0.15-0.25% of transaction value, will be mitigated if not altogether offset by reduced fraud costs which ran by some estimates at 10-12 basis points for card-not-present transactions in 2012, and 3-4 basis points for card-present transactions.

The benefit for retailers of Apple Pay is that it will allow them to integrate payments and marketing. As discussed above, consumer adoption is unlikely to be strong if the only value-proposition is the replacement of a card-swipe with a phone tap, but this is not the plan of early-adopting retailers. This Monday, for example, Macy’s announced that in partnership with Shopkick (a developer which supports retailers in implementing iBeacon networks), it would be expanding its trial program of iBeacons to allow iPhone customers to access location-specific deals and recommendations during store visits. Macy’s will also support Apple Pay so that, having begun and evolved their shopping journey on a mobile app, shoppers can complete it at checkout. Aside from reducing potential cart-abandonment risks, this also allows for loyalty redemption to be integrated into the payments process and for customers to maintain a digital log of receipts.

MCX and Data Strategy as Key Success Factor in Retailing

On September 3rd, just 6 days before Apple’s scheduled announcement that was widely expected to include a mobile payments solution, MCX issued a press-release confirming that its solution, under the brand name CurrentC (a play on the word “currency”), would roll out nationally in 2015; the release promised that the CurrentC app would be secure, would not require point-of-sale upgrades (beyond a barcode reader), and would integrate payments and marketing “by applying qualifying offers and coupons” and that these rewards, once entered, would be “detected, applied, and earned automatically during the transaction”.

The timing is not coincidental since MCX merchants have agreed not to accept mobile payments solutions from competitors, and it will become increasingly difficult to honor this commitment if MCX itself does not offer an alternative. A key motivation for MCX is that member-retailers will each own their own data; there will be no involuntary sharing of transaction data among merchants or with outside parties (other than the bank owning the funding account against which a transaction is settled). While retailers have particular concerns about data leakage for Google Wallet, they have a more general concern about data leakage into the Visa and MasterCard systems, including through Apple Pay, which MCX looks to mitigate.

A second key motivation for MCX is that other solutions transfer the existing network rule-set for cards into mobile payments; through WMT, MCX has been clear that “the existing rules that are in place for card-based payments are not going to be acceptable for mobile-based payments[13]”. In the release, MCX promises the CurrentC app will “offer customers the freedom to pay with a variety of financial accounts including personal checking accounts, merchant gift cards and select merchant-branded credit and debit accounts”. It promises additional payment options over time and these are likely to include network-branded debit cards (given the Durbin cap on debit interchange and notwithstanding the risk of data leakage), but not network-branded credit cards.

The challenge for MCX, particularly if network-branded cards are not included in the CurrentC app, will be to gain consumer enrolment and use. Certainly, there are frictions in the enrolment process since shoppers will need to provide checking account information (e.g. through a canceled personal check or a network-branded debit card) but, having enrolled with one merchant in the MCX consortium, these credentials will be valid at all member merchants. Furthermore, Target has demonstrated that these frictions can be overcome so that its proprietary RED credit and debit cards now account for 20% of US tender and have maintained this despite the security concerns triggered by the data breach announced last November (see Exhibit 9).

Exhibit 9: Penetration of Target RED cards in US

Of course, Target offers a 5% discount to shoppers using the Target RED card, whether credit or debit, representing a significant inducement to budget-conscious shoppers. We expect MCX member retailers to be as aggressive and for MCX to achieve the same 20% tender-penetration by 2019; this would represent $300bn (or 7.5bn transactions assuming an average ticket of $40) given that current members of MCX account for ~$1.5tn of retail purchase volume. The corresponding headwind to US growth for Visa and MasterCard amounts to 1-2% annually given today’s purchase volume of ~$4tn across the two networks, and the corresponding annualized revenue to FIS, as the network partner of MCX, amounts to $150mm assuming an average processing fee of 2 cents/transaction. The marginal cost of these incremental FIS revenues is near-zero so that incremental tax-adjusted earnings are ~$100mm equivalent in market-cap terms, applying a p/e ratio of 16 and discounting back to today at 10%, of ~$1bn (or ~6%[14] of the current market-cap of $6bn).

In basing our MCX estimates on Target penetration, we are implicitly assuming that MCX members will be aggressive in rewarding customers as Target has been through its 5% discount program. Even adjusting for a gross margin of 30% (so that the cost to Target is ~3.5%) this program is more expensive than the 2-3% fee on a premium credit card and significantly more expensive than the 25 cents fee (equivalent to ~0.6% of transaction value for an average $40 ticket) on a Durbin-regulated debit card; Target defends the incremental cost in terms of the lift to visit-frequency and ticket-size that comes from funding rewards that the consumer associated with the merchant brand as opposed to funding rewards (through the card interchange mechanism) that consumers associated with a bank brand.

Regardless, we do not expect MCX member merchants to adopt Target’s approach of offering flat discounts if, for no other reason, than this creates a risk of retailers discounting against themselves. Rather, MCX is being implemented as a mobile-only payments solution (so there will be no CurrentC plastic) so as to leverage the opportunity to provide real-time e-coupons that are personalized for a consumer’s shopping habits and location so as to maximize the spread between perceived value and cost. The key to this approach is building, updating, and protecting a digital-profile of the shopper and, we believe, that data strategy will be increasingly important to the competitive dynamics among reasons. Don Schulman of American Express captures the idea succinctly when he says “data is the weapon”.

  3. Walmart, for example, embeds planograms (i.e. digitized maps) of each of its ~4,200 stores in the infrastructure supporting its mobile app with the relevant map being presented to a shopper based on the particular store visited.
  4. This contributed to 30% growth in online sales at WMT in 2013 compared with 20% at AMZN (albeit off a lower base with WMT online sales of $10bn, about 2% of firm-wide sales of half a trillion, versus $68bn at AMZN). Online sales are also growing at 30% at TGT and, at just over $2bn, are approximately 3% of firm-wide sales
  6. StrategyCorps survey covering 2 million accounts at 100 banks with an average balance of $5,600 and for the 12-months through April 2013.
  7. Prepaid cards are not subject to the Durbin cap on debit interchange (which, in part, explains their rising market share) provided funds-access is limited to point-of-sale purchases; if consumers have non-card access to funds, such as from checks, then card is deemed a debit, rather than prepaid, card and the regulatory cap on interchange applies for covered issuers.
  11. The API provides explicit instructions to developers about how to handle the “payments sheet” containing data including the merchant, issuer, and transaction amount.
  12. Some banks, including COF, will allow consumers to provision debit cards into Apple Pay using the iSight camera but, in practice, most consumers will likely default to the card-on-file in iTunes.
  14. In practice, the benefit to FIS will likely be substantially larger given the long duration of the opportunity as MCX continues to gain share, the scope for add-on services (including from mFoundry which designed the SBUX mobile app), and improved pricing power in the core issuer processing business.

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