After last weeks’ announcement in the Wall Street Journal that the major U.S. banks were in talks with Apple regarding a person-to-person (P2P) service, a lot of conversations are being had about what it all means. Unfortunately we are low on facts, but guessing how a partnership like this could evolve can be rewarding. As an article in Recode muses, a big bank and Apple match up may leave the global card networks behind:
Although Apple’s strategy has not been fleshed out, the current idea could cost the credit card companies if it becomes a hit (yes, it’s a big “if”). But more importantly, it would set a dangerous precedent for the card networks if Apple, as one of the most powerful technology companies in the world with a track record for shaping consumer habits, builds a new payment product that routes money around their pipes.
To take the other side of this argument, also handicapped by a lack of facts, leaving the card networks behind entirely may be limiting the solution. All consumers who conduct a P2P transaction have a debit and/or credit card and may want to use them to fund or receive a transaction. Also, P2P transactions will need to be secured, most likely through the use of a tokenization. The banks mentioned to be in conversations with Apple all currently participate in a tokenization solution provided by none other than the card networks. These tokenization services are provided for free. At least for now.
Overview by Sarah Grotta, Director, Debit advisory Service at Mercator Advisory Group
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