I finally received my new iPhone 6 in the mail a couple of weeks ago. Within hours I had set up the phone, including my credit card in Passbook so that I could use Apple Pay.
As I mentioned in a previous blog, Apple Pay – A Heads up for Credit Unions, the use of Apple Pay is very appealing for several reasons. First of all, it allows me to leave the house with just my phone and a driver’s license. Secondly, it is more secure than the traditional swipe transactions because of the tokenization. Tokens are randomly generated numerical series that are tagged to each transaction to provide a higher level of security not possible with our current plastic credit and debit cards. Finally, I am able to see the transaction that will post to my credit card right after I have approved the transaction on my iPhone. I did my first transaction at Panera restaurant (thank you Panera) and thought, “Wow this is amazing, our payment technology is now sync with the times!”
Not so fast. The next day I discovered that some major retailers including Wal-Mart and Best Buy have decided to create their own version of “Apple Pay” called MCX (Merchant Customer Exchange). MCX will be a debit card-based application that will allow retailers to gain visibility to the spending habits of the MCX users.
My response to this was, “Who came up with this dumb idea?” There are two good reasons for my response: First, there is no way that I am putting my debit card on any mobile device. Why? Your debit card is a direct line into your checking account. If it gets stolen you will have to deal directly with your financial institution to get your money back, which may take longer than you think. Conversely, if you use a credit card, you have a line of defense between you and your checking account plus the backing of a payment processing service used to dealing with a high volume of fraudulent transactions. Secondly, I am not comfortable knowing that Wal-Mart, or any retailer for that matter, has visibility to all of my debit card transaction activity, regardless of the merchant.
I like the idea of transacting with a service like Apple Pay or CU Wallet where I am able to load my credit cards into a virtual wallet on my phone. For me, it is about security and convenience. However, I think Apple's CEO Tim Cook should re-consider the 15 basis points he seeks to grab from every transaction and find a way to work with the financial institutions and credit card processors that is much more equitable for all parties involved.
I would also like to see the credit union movement make CU Wallet a reality. As much as I like Apple Pay, I would choose my credit union over Apple for my wallet technology. Credit unions are a more neutral party that is very focused on keeping their members satisfied. As for the retailer debit card version MCX, if that gets traction at the expense of Apple Pay and CU Wallet, I will be both surprised and disappointed.