Apple Pay Is Not Mobile Payments

Apple Pay Is Not Mobile Payments

It's Not The Payment Process That Is New

Apple (and others) have only placed a new UX (user interface) in front of the card payment process.


Apple Pay is a Card Payment. It is NOT a Mobile Payment.

Hear me out. We have been preached at for a few years now, Apple, Google and others are leading the way in “Mobile Payments”.

They haven't done anything new. Apple and Google are not 'doing' Mobile Payments at all.

Don't misunderstand me though please...Card Payments are great.

I like the idea of not carrying cash. Mom always told me it was filthy.

I like my Bank Cards. Only I get to touch them, and that, allows me to keep them clean.

But...

Maybe you are like me...you don't like the idea of it being so easy to steal or copy a Bank Card. And that leads me to a question...

Why are Bank Cards Easy to Copy?

Two reasons.

One – they hold a very small amount of data

and Two – the data on the magstripes is clear text.

Warning: This next paragraph might put you to sleep, but its important – read it!

Just looking at the raw data capacity (ignoring the limitations of formatting), the credit card is holding 3 tracks (you could probably fit a 4th) on 3.62 inches in length, at 210bpi (we'll be generous, and assume the track running at 75bpi could record at 210bpi if it had too). That is 4 x 210 x 3.62 = 3.04kb (being ultra generous). Source:http://www.thenakedscientists.com/forum/index.php?topic=12635.0

That is why, it is so easy to a waiter to copy a card by swiping to over a mag reader in his pocket. It only needs a tiny amount of data (3kb), and its clear text, so no need to unravel the data.

Are Mobile Payments Be More Secure than Cards?

Just look at how much data your smartphone can store. One of the test phones I have in the developer lab here, is a four year old MTK6575 with a cracked screen and, 2gb storage.

If a Card could store 2GB it could handle a lot more security. Maybe they will one day.

Right now, the banks can't afford to update this 50year old technology. The Magstripe is here to stay, with its 3kb!




The Answer Is Staring The Banks In The Face

Mobile Phones could replace Bank Cards.

Smartphones offer so much more security, that the Regulators are worried. Products like Secret and Blackphone have the Government agencies in a tizzy.

Why? Because they can encrypt communications privately.


Why cant we use this technology to secure payments?

We could. In fact I even tried to go a step further and cut out the need for a Bank card altogether.

I blame my childhood. My older brother had this amazing toy electric crane, with an electro magnet to pick things up with. I played with it for weeks. My curiosity got the better of me. I took it apart to see how it worked. A bit like the time I blew the house electrics when I shorted out the pins on the fish tank pump to see if it would really spark.

So I took apart the whole process of how a Card Payment really works. Exposing its faults and short circuits for the light of day to shine on. Here is a great explanation of how the Card Payment process works, in layman’s terms, its an easy read. It wont put you to sleep like my mag stripe explanation did. Here's the link to read the explanation: http://goo.gl/qCtbfo

The only lights that went off this time were those at the banks.

It is entirely possible, and very easy in fact, to use two mobile phones[device to device] to complete a payment.

And you don't need a bank card at all!

How?

If you're still awake, my powers of sleep induction are failing.

Its so simple. The money you pay with when using a card is already in the bank, right?

All you need to do is change the ownership of the money.

You do NOT have to move money in order to settle the payment. Well ok. There's a caveat on that one. I will explain that in a bit – for now just nod you head like you agree, not like you are falling asleep!

Here's how.


Phone#1 invoices Phone#2


Phone#2 accepts or rejects the invoice.

Accepting the invoice and “paying” it, changes the ownership of the funds from Phone#2, to now be owned by phone#1.

Oh, that caveat... For this to work, both phone's funds must be part of the same account (read economy or closed loop)

Unlike my brother's toy crane, which stayed in pieces, I made this work on Mobile Phones. You can ask me how I'll be happy to show you.

A Mobile Payment is Between Two Mobile Devices. No Bank Cards Needed!

Imagine being able to pay, and not have the life sucked out of you by bank fees....

I'll try to show you with some simple graphics. I make no excuse to not studying graphic design.



First, you need a Mobile Wallet, of course. This is a screen grab off my phone.













Next - the merchant[vendor] create a simple invoice by QRcode, SMS, anything on the the mobile itself.

Finally, you need to have the customer scan the QRcode with his own phone. Using some opensource kit you can easily scan and match the QRcode to the Wallet account to be debited.

About Graeme Lewis: Graeme spent some years working in African Moile Operators where his love grew for finding simple solutions for difficult problems. He led the implementation team for MTN Mobile Money in 2001 with four big banks and a Mobile Operator – it was the first mobile payment system in Africa. He is now based in London at the centre of the Fintech industry. He is currently working on rolling out a Mobile Payment Platform as a Service, with a London Bank, an international Forex partner and a Nigerian Money Service business. Aside from true Mobile Payments his passions lie in building a compliant Settlement Platform for Domestic and International Payments.

My apologies to Tom Goodwin for hacking his great graphic!