
Apple Pay and the rise of the five-party network - npratini
https://fin.plaid.com/articles/apple-pay-and-the-rise-of-the-five-party-network
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runeks
A centralized payment system will never be able to provide the best service
for users. With a single entity in control -- as opposed to an open system
where newcomers can enter and compete with incumbents -- there are no
competitors, and competitors are responsible for pushing down fees and adding
innovation, thus forcing incumbents to follow along or fade away. That's why
the web is so successful: competition is built in through an open protocol, so
competitors can replace incumbents by providing a better service/price.

With the iPod and iTunes, and the iPhone and the App Store, Apple created
something that didn't exist before, and captured most of the newly created
market. Replicating VISA's business model doesn't do the same, but simply adds
a couple of features to an otherwise closed system where users will not
benefit from competition.

An actual alternative to VISA needs to be open, allowing for competitors to
easily enter and compete with existing actors. Such a system is the Stroem
protocol on top of Bitcoin, which is a thin clearing protocol designed for
competition, constantly forcing issuers to follow along on price or be left
behind. This is what merchants want, and what's needed to revolutionize
payments.

~~~
samfisher83
This is probably not a popular opinion. Visa and Mastercards were all owned by
the banks that back your credit card. These are highly regulated
organizations. I rather not have startups that have sometimes have pretty
dubious reputations for skirting the law trying to get into this space. What
if someone steals your bitcoin what do you do? Or if you purchase something
and you don't get it.

~~~
aianus
It's cheaper to lose 100% of your purchase 2% of the time than 3% of your
purchase 100% of the time.

Insurance is for health and houses not my $8 lunch or $500 wallet contents.

~~~
samfisher83
You don't think some startup will not take fees? Who is paying for
infrastructure and salaries?

~~~
aianus
The fees can be a lot lower when you don't have to maintain rewards programs,
liability for fraud, or dispute mechanisms.

Bitcoin is ridiculously inefficient compared to what a centralized entity
could be and it's already cheaper than wire transfers or even credit card
transactions over a certain size.

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needusername
Does anybody know how Apple Pay peer-to-peer actually works? I find all the
information I can on the web disappointingly light. The same thing was true
for the original Apple Pay which lead to myths like Apple Pay using a new PAN
every time out pay.

> Bank transfers will be handled separately.

When are bank transfers used and for what? For unloading? If so do you have to
unload via bank transfer or can you use a CFT transaction? I can't imagine a
case where you want to unload using an ACH or SWIFT transaction. I would image
you always want to use a domestic settlement system or T2 if you can.

> Apple Pay Cash’s back-end is powered by a Green Dot-backed Visa prepaid card

Only in the US or globally? I imagine there is a lot of fine print associated
with that like the amount of funds you can store. I will get a tax statement
even if I live outside the US, right?

~~~
tear888
It's a debit push payment. Everyone is issued a green dog virtual card and
then the entire network works over debit (with a layer of abstraction that
Apple builds on top).

~~~
needusername
> It's a debit push payment

What does that mean?

> Everyone is issued a green dog virtual card

I assume that's just a VISA Debit or VPAY with a special BIN range. Is that
correct? Does everybody in the world participating in Apple Pay get a US
issued VISA Debit card?

> then the entire network works over debit

There is no difference at all between VISA credit and VISA debit apart from
interchange and when how the issuer bills the card holder. The whole
infrastructure is the same. I assume with "works over debit" you mean is VISA
cleared, is that correct? Does that also mean that unloading happens with a
CFT transactions? If so what does the following sentence in the article mean
"Bank transfers will be handled separately."?

~~~
SyneRyder
They're good questions, but I think they're answered by the point that Apple
Pay Cash is US-only. The service is just Apple's abstraction of Green Dot [1]
branded prepaid reloadable VISA cards. If it's US only, Apple doesn't need to
worry about the international corner cases yet.

There's some more info at Recode [2]:

[1] [https://www.greendot.com/](https://www.greendot.com/)

[2] [https://www.recode.net/2017/6/5/15741636/apple-
pay-p2p-venmo...](https://www.recode.net/2017/6/5/15741636/apple-
pay-p2p-venmo-competitor-apple-pay-cash-money-transfer)

~~~
needusername
> Apple Pay Cash is US-only

Thank you, I missed that point. I guess it's understandable given the
environment but still I wish Apple would have gone for something more
ambitious like the original Apple Pay.

