Payment processors First Data Corp. and Total System Services Inc. (TSYS) will have key roles in securing transactions using tokenization technology for payments consumers make with Apple Inc.’s newly announced Apple Pay mobile-payments scheme. The Cupertino, Calif.-based computer giant made the announcement as part of its unveiling Tuesday of its new iPhone 6 device.
Atlanta-based First Data will help issuers provision tokens for consumers to use in the payment scheme. Tokenization replaces the actual card data needed for a transaction with a randomly generated digital code. First Data’s network enables tokens to pass through its system.
TSYS says it will offer software development kits and application programming interfaces to enable merchants and developers to accept Apple Pay transactions. TSYS Enterprise Tokenization also is available to issuers and retailers for use with the Apple scheme.
Essential to Apple Pay’s adoption is persuading merchants to accept the nascent payment service. First Data is trying to make it easier for merchants to accept contactless payments, and sells the FD 40, a contactless-compatible PIN pad that can be attached to integrated point-of-sale systems like First Data’s Clover.
Aside from tier-one retailers like Best Buy and Target Corp., millions of smaller merchants will need Apple Pay-compatible POS equipment. First Data will start promoting Apple Pay immediately, Barry McCarthy, president of First Data Financial Services, tells Digital Transactions News. “The timing with EMV plus NFC creates an unusual intersection for sales organizations to talk with their clients,” McCarthy says, referring to the Europay-MasterCard-Visa chip card standard and near-field communication, a standard used in mobile payments to link mobile devices with the merchant point of sale. Apple Pay will rely on NFC.
The U.S. payments infrastructure is in the midst of converting to a smart card system using the EMV standard that requires credit and debit cards to be dipped into a payment terminal. Many of the EMV-compatible terminals also are contactless compatible, leaving them capable of NFC payments.
Apple Pay may benefit from that equipment conversion, which may aid merchant adoption below the top tier of retailers. Other mobile-payment schemes, like Google Wallet and Softcard, formerly Isis, have been challenged in signing enough merchant-acceptance locations and other issues.
Apple’s involvement could mean a different outcome, McCarthy says. “There are going to be 10 million- plus [iPhone 6] devices we’re anticipating in the marketplace,” he says. “These consumers will create demand to use the devices at the point of sale.” And because Apple Pay transactions will be tokenized, merchants and consumers will have a measure of additional security, he adds.
First Data also is enabling compliance with the Durbin Amendment with a service that enables issuers to use the processor’s Star debit network as an option. The amendment requires issuers to offer two debit networks on their debit cards.