Apple launch – more lessons learnt than innovation?
Sometimes its easier to watch (no pun intended) where others go wrong than to be the innovator. Case in point is last weeks Apple product launch of the iPhone 6, 6 Plus and the Apple Watch, which was booed by a few (very few actually…) as showing no ‘real’ technology innovation. This may be the case, but what Apple has done this time around is to identify and tackle the challenges that have plagued parts of the mobile industry. Design with wearables? Check! Security with Mobile Payment? Check! Making use of existing credit card infrastructures? Check! Finally, well done Apple, for finally including NFC in your hardware, but what exactly does this NFC inclusion really mean for players in the NFC ecosystem? And more importantly – what lessons have you learnt by waiting so long?
First, let’s applaud Apple for putting on a great show last week and introducing some products that may indeed sell well for them. The Apple Watch particularly looks interesting and will no doubt have the wearable market booming for a few years to come, especially with the Apple Watch / Apple Pay combination. Wearable band shipments will grow 129% year on year to reach 43.2 million units in 2015, of which 28.2 million will be smart bands and 15.0 million will be basic bands, according to the latest device shipment forecasts by industry analyst firm Canalys. Canalys tracks wearable device shipments and segments the market into smart bands, which are capable of running third-party applications, and basic bands, which are not. Canalys forecast that Apple will be the biggest driver behind wearable band shipments in 2015. “By creating a new user interface tailored to its tiny display, Apple has produced a smart watch that mass-market consumers will actually want to wear,” said Canalys Analyst Daniel Matte. “The sleek software, variety of designs and reasonable entry price make for a compelling new product. Apple must still prove, however, that the final product will deliver adequate battery life for consumers.”
Apple bringing NFC into the mix for payment with their Apple Pay solution cannot be under-estimated (despite the grumblings from some sources that Apple made it look like like they invented Mobile Payments!). I personally think that this is a good thing for the entire industry – whatever the operating system behind the hardware. And I am alone in thinking this. “This is a big step forward. With Apple on board, NFC gets the final seal of approval it needs. Apple’s formidable strength is in convincing consumers that they need something, so in that regard its support of NFC is a turning point for worldwide consumer adoption. It is likely to spark a reaction from Android and Windows phone makers who will want to ensure their devices match the innovative uses of NFC we expect from Apple,” commented Neil Garner, CEO and Founder, Proxama.
Security is vital to Apple's pitch, particularly because the company is still working to calm consumers' worries about the safety of its iCloud service, which was targeted as part of a leak of nude celebrity photos a few weeks ago. When it comes to restoring the public’s trust in the underlying security mechanisms, Apple is betting that tokenization systems offered by payment companies will provide a credible security boost to its new Apple Pay system. Apple Pay uses tokenization to replicate consumer card credentials and assign each account a randomly generated number in the cloud. That number, or token, is then stored on the device's secure element. First Data, TSYS, MasterCard and Visa have announced that their tokenization technology will support Apple Pay, enabling the upcoming iPhones and Apple Watch to make contactless payments at a variety of retailers. Apple Pay uses tokenization to replicate consumer card credentials and assign each account a randomly generated number in the cloud. That number, or token, is then stored on the device's secure element.
The iPhone also generates dynamic data for each contactless payment as Eddy Cue, Apple’s senior vice president of Internet Software and Services, said in his presentation, “We’ve also integrated security throughout both the hardware and software in a way that only Apple can so when you add a new credit card, we don’t store the credit card number, we don’t give it to the merchant. We create a device-only account number and we store it safely in the secure element and each time you pay, we use a one-time payment number along with a dynamic security code so you no longer have the static code on the back of your plastic card and if your iPhone is lost or stolen, you can use Find my iPhone and suspend all of the payments from that device and again, because the credit card isn’t stored on the device, there’s no need to cancel your credit card. Now, security is at the core of Apple Pay, but so is privacy.”
“We are not in the business of collecting your data. So, when you go to a physical location and use Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it. The transaction is between you, the merchant and your bank. It’s fast, it’s secure and it’s private.” he concluded by saying.
At least Apple realises that the question of security is becoming the first and foremost thought on users list of why they are nervous about embracing mobile payments. Wether the solution is tokenisation and the necessity of having the secure Element on the handset itself is almost besides the point – they tackled the topic head-on and all credit to them. It’s an important topic, that others in the industry are also keen to cover. “Apple’s use of the secure element in the device, and the fact that Tim Cook spent a good deal of time talking about the importance of consumer privacy considering transaction data, is exactly in line with what we have been working on within our CardGateway product, with our work with ARM and Trustonic for TEE on security, and with our many customers like Barclaycard, Mastercard, Softcard (formerly ISIS) and others in other markets,” commented Neil Garner, CEO and Founder, Proxama. “The cryptography measures Apple described are in line with what we have done, and will also help allay both merchants’ and consumers’ potential worries about security, and ultimately help adoption of mobile payments thrive.”
The approach to installing the Secure Element on the phone (as say, within the SIM card) does have certain drawback though, as Softcard (The mobile payment venture formally known as Isis) CEO Michael Abbott alludes to in his blog post last Tuesday, “When our company was founded, our vision was to develop a simple wallet app that consumers could use on any device, anywhere with any card. To deliver on that promise, we selected NFC as the best technology that was secure, simple and open to innovation. We think that today’s announcement by Apple to support NFC is very significant and sets the stage for rapid scale adoption of mobile commerce. We would like to let you know that we are actively working with Apple to enable Softcard on the iPhone in 2015 — using an integrated secure SIM-based hardware solution.” There are no further details on what “an integrated secure SIM-based hardware solution” might be, or any other aspects of Softcard’s work with Apple, are being made available by the company at this time.
Sarah Clark, writing for NFC World, attempted to decipher this a little more; “The solution described by those carefully chosen words does not sound like a SIM, however, as that is removable, but it does sound like some sort of embedded technology — and an Apple patent application from 2011 may point the way to understanding the iPhone maker’s plans here. The ‘Sim within’ patent set out a way for a virtual SIM card to be built into an embedded secure element which could, in turn, be attached to an NFC controller chip.The Apple concept is similar in nature to the NFC SIMs issued by mobile network operators bringing NFC to market around the world — except it is in reverse. In an NFC SIM, the NFC secure element sits inside the SIM, putting the carrier in overall control of a phone’s NFC functionality. In Apple’s concept, the SIM sits inside the embedded secure element, putting the iPhone maker in overall control of the unit and bringing in a trusted service manager (TSM) to provision customer credentials onto the unit on a carriers’ behalf.”
Another area that lacked detail during Apple’s launch of an NFC-embedded iPhone was that related to tags or pairing. Tag specialist RapidNFC’s founder and CEO, Phil Coote, after examining the Gold Master version of iOS 8 that was released to developers, was reported as saying, “As of the current software release, there isn’t any support for general access to the NFC controller. Clearly, this is a little odd because it might mean that pairing is not supported. However, being able, for example, to read and encode NFC tags is not an option at the moment. The barrier now would appear to be a software one rather than hardware, so it’s a step in the right direction.”
This was a sentiment echoed by Rupert Englander, Managing Director of Wooshping, ““Naturally I am delighted that Apple has finally embraced NFC and the future of mobile payments seems assured. However I am concerned by the lack of information being offered by Apple on other equally as important aspects of NFC implementation such as pairing, sharing and engagement. For NFC to continue to gain traction and buy-in the iOS system must support these other use cases or consumer will once again continue to be confused by what they can and cannot do. I have visions of iPhone 6 users waving their phones furiously against a Talking Statue and nothing happening. That would not be great. So yes I am delighted that Apple has embraced NFC but remain cautious until we see further evidence of a full and open implementation.”
Until we see full release and delivery of the phones from 19th September onwards and how the following months progress and the development releases roll out, we won’t really know for sure. However, considering it took almost 12 months for Apple to open up programming access to Touch ID, it may be a case of ‘Better late, than never’.
And that’s another headline I could have used…
Until next week,
Steve Atkins
Contactless Intelligence
PS - And what lessons did they learn from late entry to mobile payments? In my opinion, ‘make it simple and make it secure…’
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