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Say hello to Apple Pay. It’s the new kid on the payments block and, depending on how things unfold, it could be the new Gorilla in the mobile payments ecosystem.

Here’s what it is.  When consumers get an iPhone6 or 6 Plus, they can use Apple Pay almost right away (obviously in October when it is live at merchants) as long as they have an iTunes account – and there are 800 million of those now in the world. All these 800 million consumers need to do is to enter their CVC code and they’re up and running.

Consumers can then use those Apple Pay accounts to pay at places that have NFC terminals by holding their phone near the device and holding their thumb on TouchID. (Whether this is faster than swipe remains to be seen.) Want to put another card in? Just snap a picture and Apple will do the rest—so long as it’s with one of its affiliated banks (which now includes those that control more than 80 percent of the consumer transactions in the U.S.).  Consumers can always do it the new old fashioned way and type in all the card details into Passbook.

Card info isn’t actually stored on the phone at all. Cardholder information is tokenized and stored in the secure element and never makes it onto the phone’s memory or on Apple’s servers in the cloud.  That’s a pretty big deal. Apple Pay leverages the card network’s tokenization standard, which pretty much seals the deal on how cardholder security will be done in a digital world. Between that and fingerprint ID, Apple Pay seems pretty secure. The spiffy Apple Watch that they showed also enables payments but must be paired with the phone to do it.

There are two other big deals here.

The first is that Apple Pay is also headed online, which means it is going head to head with every other digital online acceptance mark, e.g. PayPal, Visa Checkout and MasterCard PayPass.   With 800 million iTunes accounts worldwide, Apple is millions of miles ahead of all three of those guys combined. All Apple needs is for online merchants to accept it. And with all those iTunes accounts, that doesn’t seem like it will be that hard.

The second is the API. Apple is doing with its payments app what it did with Beacons and the apps store before that: creating an ecosystem that stimulates innovation and strengthens the power of its own walled garden. Allowing developers to embed Apple Pay in their apps is an efficient way for Apple Pay to get massive distribution and scale.

As great as this sounds, there are two limitations of Apple Pay right now for consumers and merchants.  And it’s that old chicken and egg issue that gets in the way of every new payments system.

At least as of today, no one has an iPhone 6 capable of working with Apple Pay. That will change on September 19th, but most people won’t be able to use Apple Pay next year because they won’t have the right phones.  Estimates say that Apple will sell roughly 180 million phones over the next 12 months worldwide and about 25 million of those are in the U.S.. Since that is where Apple Pay works today, analysts say that the addressable market for Apple Pay is 25 million when they count the number of people whose contracts are up and who are eligible to buy a new phone. Apple is, of course, hoping that enough people find the iPhone 6 cool enough that they buy it anyway, contract terms notwithstanding, which could make that number much higher.

Then consumers that do have Apple Pay can’t really use at it very many places right now. Apple says that there are 220,000 merchant locations today that accept NFC but that’s a small fraction of the 8 million plus point of sale locations in the U.S..  Apple Pay ignition depends on merchants believing in Apple and consumers believing that merchants will believe in Apple.

So that’s why what happens next will be really important to watch.

Apple clearly did not intend to innovate payments in its purest sense of the word. It preserved, yet made digital, the core tenants of the four party system that has defined the payments world for the last 60 years. It has given NFC an entirely new lease on life and all but crowned it as the technology standard for payments. As we’ve said many times, NFC needed a catalyst to ignite it and the longer that it lacked one, the more it was at risk of becoming obsolete. Apple Pay is banking on the fact that enough merchants in the U.S. will light up the NFC capabilities that come with their new EMV terminals. The promise of millions of high spending Apple Pay consumers may be that catalyst.

It appears that Apple did intend, however, to reinvent the experience of buying.  We’ve seen hints of it already as making a payment with Apple Pay in a physical store doesn’t require popping open an app to activate the card. This is just the tip of a very deep iceberg. Expect that experience on steroids as the beacon and payments ecosystems mash up, inspire innovators to spring into action to create entirely new sources of value for consumers and merchants.

The other subtle, yet potentially game changing observation I had today is how Apple chose to name its payments capability. Apple introduced us today to Apple Pay, not iPay, not iWallet. Apple wants the consumer association with Apple first and foremost. Sure, card brands and network brands are visible, but Apple Pay will make every other brand subordinate to it because that is how the consumer and the merchant will view it.

That means that the power, at least in the iOS ecosystem, is likely to accrue over time to Apple. And with 800 million registered accounts, well, it might not need that much time.  Just ask the mobile operators what happens when Apple exercises its power over an ecosystem: the balance of power shifts in a pretty dramatic way to them.

Fast forward a few years and it is quite likely that payments becomes an ecosystem defined by apps in the cloud, assembled in Passbook under the control of Apple at least for the iOS ecosystem.   Not only did we meet Apple Pay yesterday, we might also have just met one of the most powerful players in the payments ecosystem.

Let’s not get ahead of ourselves. The news is still fresh and many details are still not known and those that are must still be digested. Today, in many ways, marks the beginning of mobile payments 3.0.  The next couple of years will be something to watch now that Apple is in the game.


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Alto Global Processing: PayPal and Samsung enabling commerce with fingerprint authentication on Galaxy S5

PayPal and Samsung have announced a collaboration that will make Samsung Galaxy S5 users the first to be able to login and shop at any merchant that accepts PayPal on mobile and in-stores with only their fingerprint.

The new biometric feature will mean that Galaxy S5 users will no longer need to remember passwords or login details, PayPal will be the first payments company to support Samsung’s mobile fingerprint authentication technology.

“We spearheaded the Fast IDentity Online Alliance last year and predicted that the industry would soon move beyond passwords, and this announcement brings us one step closer to that reality,” said Hill Ferguson, Chief Product Officer for PayPal“By working with Samsung to leverage fingerprint authentication technology on their new Galaxy S5, we are able to demonstrate that consumers don’t need to face a trade-off between security and convenience. With a simple swipe of a finger, consumers can still securely log into their PayPal account to shop and pay with the convenience that mobile devices afford.”

“We are very excited about our relationship with PayPal as it will bring one of the most trusted online payment solutions in the world to the broader mobile market,” said Hankil Yoon, Senior Vice President of Mobile Product Strategy. “Together with PayPal, we expect to provide our customers with a seamless and secure experience in online shopping and payments on our new Samsung Galaxy S5.”

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Alto Global Processing: International e-commerce sales to triple by 2018

Sales of online goods between countries are set to triple over the next five years to be worth USD307bn. The figure, which comes from a report commissioned by PayPal, represents a jump from USD105bn this year in cross-border e-commerce between Australia, Brazil, China, Germany, the UK and the US.

The report found that last year a quarter of all marketplace revenue and more than half of payments processed by PayPal came from international transactions. With figures set to rise, PayPal has been upping its cross boarder promotion in emerging markets, focussing on China as a particular area for further growth.

The US was the top exporter, with 45% of those surveyed saying they bought goods from there, followed by the UK with 37%. China was the biggest destination for US goods, with 84% of Chinese online consumers asked buying from the region.  Clothes and shoes are expected to remain the most popular items, followed by beauty products and consumer electronics devices.


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Alto Global Processing: “The B2B payments revolution will eliminate 90% of accounts teams” – GoCardless

At the inaugural Wired Money conference Tom Blomfield, founder of online payments start-up GoCardless, declared a long overdue revolution in B2B payments that could leave 90% of accounts teams redundant.

Speaking at the conference in London on Monday, Tom told audiences that business-to-business payments are stuck in the dark ages, whilst payment providers have made consumer payments online instant, convenient and intuitive.

“In the 90s the biggest problem on eBay was transferring money to another person,”b2bpayments_220_1000

says Blomfield.“PayPal innovated around that problem. The same revolution is needed in business-to-business payments.”

With a lack of innovation in online payment and billing, businesses are forced to rely on antiquated payment methods such as cheques. Audiences were shocked to hear that 80% of B2B payments in the US are still made by cheque. Accounts teams are left to contend with a laborious job of sending invoices, chasing late payments and manually reconciling bank accounts. The result is that UK businesses are suffocating under GBP30bn of late payments.

“At GoCardless we want to make business to business payments easy. We do so by making it simple for companies to take Direct Debit payments online, which puts them in control of when they are paid without the need for a merchant account or expensive credit card fees.”

He went on,

“By being resolutely data-driven, we’ve built a fully automated payment system. It has helped small to medium sized enterprises such as the Ask Driving Schools reduce their accounting time by 80%, and double in size in just a year. Using GoCardless with their accounting software means Ask don’t have to re-key invoices and receipts. With the right authorisations in place, we make computers do the hard work for us – and can render 90% of accounts teams redundant.”

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eBay Acquires BillSAFE to Enhance PayPal in Germany

 eBay has announced that it has acquired BillSAFE, a payment-upon-invoice payment provider in Germany.

“By combining BillSAFE with PayPal, which serves more than 15 million accounts in Germany, PayPal believes the addition of BILLSAFE will provide a comprehensive payment service for merchants and consumers. BillSAFE works with merchants of all sizes in Germany, giving them a simple and secure way to let shoppers purchase using an invoice. Customers simply select the item they want to buy, and then they receive an invoice for payment after the item is received.”

The BillSAFE website is at


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