Apple’s banking stick-up!
Banking & IT
The banking industry, retail banks in particular, understood very early on the importance of computerising their data. Therefore, they set up systems to facilitate the processing of flows. This was suitable for the sector because the banking industry has always had to manage a large and regular amount of flows and calculations.
The era of the technical payment exclusivity
Since the late 1920s, banks equipped themselves with perforated card machines in order to mechanize calculation tasks. At the end of the 1950s the first computers appeared in processing centres and banks began networking their computers at the end of the 1960s.
During that prosperous time, retail banks acquired a major end-of-20th century technology, the SmartCard. The first cards were produced in the US in 1914 by Western Union and then spread throughout the 60s. These first ones were very basic and did not include any magnetic stripes or microchips at the beginning. The first magnetic stripe cards appeared in the 70s while the electronic Smartcard was launched at the end of the 80s.
In France, the EIG ( Economic Interest Group ) ‘Carte Bancaire’, which groups most banks in the country, initiated the ordering of 16 million CP8 cards produced by Bull. These cards were launched in 1992.
As a result, banks, and in particular French banks, quickly understood the importance of this payment method and created an inter-bank consortium to facilitate the interoperability of smart card payments (in France, the network is called “Carte Bleue”). This interoperability system was undoubtedly one of the reasons for the success of this new payment method. It also ensured that banks had a supremacy over the system they had created themselves, since they had to belong to the EIG to be able to issue a card on the network.
A first sign of turmoil in the early 2000s
At the end of the 2000s, an American company called Paypal launched a service for transferring money over the Internet. The X.com company, from the now famous Elon Musk, merged with Paypal at the very beginning of 2000. Paypal then became known to the general public, and made the wealth of its managers, through its acquisition by Ebay. However, at that time, Internet purchases were still limited to a part of the population with a computer and an Internet connection. But the volume of sales on the Internet quickly increased from year to year.
During this period, Paypal was, for web actors, a quick and simple solution to integrate payment on their website. Banks also offered the possibility for companies to integrate their own payment system, but the operation was then more complex and expensive than with Paypal, especially for small businesses. Since then, other companies such as Stripe have established themselves in this sector, causing retail banks to lose a little more power to web banking transactions.
Towards a rethinking of the supremacy of payments
The questioning of the hegemony of banks in modern payment methods is currently unfolding before our eyes with NFC technology.
First of all, NFC (Near Field Communication) works through a chip that enables the exchange of information between two equipped devices. This technology is used in contactless credit cards. Since iPhone 6, Apple phones are natively equipped with it, which allows a phone to make a contactless banking transaction.
In 2016, Apple also associated this technology with an exclusive contactless payment service for iOS smartphone called Apple Pay. And to ensure the exclusivity of this technology, Apple made it impossible to access the functionality without using Apple Pay (unlike Google).
In practical terms, this means that no iOS banking application can operate this feature without using Apple Pay. Apple has voluntarily locked the control on its devices so that any NFC transaction will have to transit through them… and therefore, is commissioned to Apple benefit.
The only requirement, however, was that banks had to support compatibility with their cards. And here again, a tour de force from the Cupertino firm. Once the first bank had signed an agreement, the others had to (or will quickly) come to terms with it under the pressure from users who are extremely vocal on the Stores.
The number of card transactions worldwide between 2014 and 2015 was 433 billion and is estimated to reach nearly 726 billion transactions in 2020. A nice stick-up was therefore carried out by Apple, which is taking a cheerful bite out of the profits of traditional retail banks.
But Apple will not stop there, since the company has just released its own payment card in the United States this year, hammering the nail even deeper.
