In an attempt to control as much consumer payments as possible, Apple is in negotiations with J.P. Morgan Chase, Capital One, Wells Fargo and U.S. Bancorp to launch a bank-account-based P2P payments service, according to a Wednesday report in The Wall Street Journal. If successful, it’s value would be huge to Apple, but not on a per-transaction fee basis. The goldmine would be the data, the equivalent of knowing every check, money transfer and payment card transaction made by millions of its customers.
Beyond the privacy implications of a consumer goods company having so much consumer personal data—on top of whatever health data is being gathered through Apple’s Health app—there are also security concerns. The more avenues of access that exist into a bank account, the more chances there are for a glitch to withdraw more than expected or for the ultra-sensitive bank account routing numbers to leak where a cyberthief could see it.
Those concerns aside, P2P transactions are growing globally, as the interest in using cash and paper checks continues to plunge, especially among younger consumers. Although cash isn’t going away any time soon, mobile expectations are moving many cash/check transactions digital.
This raises the issue of trust. Who will consumers—especially the aforementioned younger ones—trust with direct bank access. MCX’s CurrentC has a direct-bank payment option. Will those shoppers trust Walmart and Target with their account and routing numbers? Then there’s PayPal’s Venmo and Square’s Square Cash, Google Wallet and even Facebook. There are then those banks.
The reality is that faith builds on faith—until violated. In other words, once shoppers are already using Apple Pay, they will quickly grow confident in its safety. Alternatively, consumers may get to the same point from a more cynical perspective. That would be thinking along the lines of “I already have so much payment data with Apple Pay and iTunes, how much more harm I am really being exposed to by adding my bank accounts?”
If a breach does happen, payment cards offer far more protection for consumers. Worst case scenario with a fraud charge on a payment is a temporary credit and, maybe, if it’s bad enough, having to wait a few days for a replacement card. Worst case scenario with fraud access to a bank account is that the account is emptied, all checks bounce, there is no money to repay their burned merchants and the bank can take months to restore the cash.
The Journal story noted that “one of the options being considered by Apple is to hook into an existing person-to-person payment service called clearXchange that is already offered by the nation’s banks, according to a person familiar with the talks. The service, which has recently been overhauled and expanded, lets people use their checking account to send each other money with an email address or cellphone number.”
If that ends up happening, “it would be a huge shot in the arm for clearXchange,” said Todd Ablowitz, Co-Founder/Publisher of PaymentFacilitator.com. “This could be a very powerful competitor to Paypal’s Venmo and Square’s Square Cash. The most interesting angle, however, is to better understand how the service will be funded. If it’s funded off a debit card, similar to Square cash, the utility will be high, and the disruption relatively low. If, on the other hand, Apple goes direct to bank accounts, that could signal a much more disruptive long term impact.”