News

With compliance at the forefront of card payments, PostFinance has embraced Rivero’s scheme compliance management solution, Kajo, to digitize and optimize its processes.

You can read the full press release published on 

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PostFinance Streamlines Scheme Compliance with Rivero's SaaS Tool Kajo

In this section, you can read featured success stories from banks that have leveraged our products.

Success Stories

We had the pleasure of interviewing Thomas Carrara, representing the Scheme and Operational Compliance Team at Viseca in Switzerland. The team has 20 years of combined experience in various roles and responsibilities in the payment industry. Viseca is one of the leading card issuers (debit and credit cards) and issuing service providers for Kantonalbanken, Raiffeisen Group, Migrosbank, Bank Cler and several regional banks.

How is the scheme compliance process organised at Viseca?

As a licensee of Mastercard & Visa, Viseca has a dedicated team called Scheme & Operational Compliance, taking care of both scheme compliance and operational compliance.

As the Scheme and Operational Compliance team, we are the second line of defence. One of our primary responsibilities involves analysing newly announced scheme rules and updates and adjustments to the existing rules, distributing them to all relevant stakeholders (internal & external) and supporting them in implementing the changes to stay compliant.

What challenges did you have in managing the scheme compliance process?

One of the biggest challenges was the workload. The process in place consisted of many manual steps. We had to download the announcements from individual scheme portals, review them one by one, upload them to other sharing platforms to distribute them to relevant stakeholders and keep track of the progress in a spreadsheet. The manual process, the steadily increasing number of announcements published by the schemes, involving more and more stakeholders due to the ever-expanding complexity of all the topics, resulted in a massive workload for the team.

Since the scheme announcements are a crucial part of the Mastercard and Visa rules and regulations, which we need to be compliant with as a licensee, one of our main responsibilities and objectives is continuous stakeholder education. As a significant amount of our working hours was spent with administrative work, too many hours really, we realised that being able to provide the service we want and need to provide to all the involved stakeholders as well as fulfilling our various other tasks would soon be virtually impossible in the current setup. We also saw no potential to improve the existing process further and came to the conclusion that we need to scan the market for a new solution that fits all our needs. Primarily means less manual labour for the team and, ideally, an all-in-one solution.

We saw the need to improve the manual work we had to do as a team, especially since other topics required our attention and time.

When we were presented with the opportunity to get Kajo, we realised that with Kajo, we would be able to maintain the workforce in the team and still manage the increasing workload. We were faced with either automating the processes with Kajo or adding additional FTEs to the team, as the workload would have been no longer manageable.

What processes & tools were in place before Kajo? And how did Kajo improve the process?

Before Kajo, we had two processes and tools for internal stakeholders and partner banks.

For internal stakeholders, we misused the JIRA board. However, as JIRA is a generic issue-tracking tool, the setup was not tailored and well-suited to the scheme compliance process. For the partner banks, we used a file-sharing portal to send them the PDFs with additional files and maintained an Excel spreadsheet for the overview. As a result, we had to keep two separate processes and tools, which was very labour-intensive.

Now, with Kajo, we manage everything in one place. Internally, Kajo is clearly positioned as a scheme compliance management tool, and everyone who is a stakeholder uses Kajo for this process. For our partner banks, we have integrated Kajo into the service portal using the Kajo sync ability with ServiceNow. Therefore, we can exchange with them via Kajo and receive their feedback in Kajo. This has made our lives much easier as we can now manage internal and external stakeholders in Kajo.

Another advantage of Kajo is the managed service. Rivero takes care of many administrative parts: Downloading and reviewing the new scheme announcements, uploading them to Kajo, providing guidance on each bulletin, and identifying the right stakeholders for each announcement. We just need to review and confirm the assigned stakeholders. The administrative part alone has been a considerable workload relief for us.

If you have been a scheme compliance manager for a while, you can quickly realise that the people behind Kajo know and understand this process and that knowledge is mirrored in the product. The product is clean and tidy. You don’t have things you do not need.

The interface is user-friendly and easy to work with, making onboarding easy.

Another aspect of Kajo that we would like to highlight is the Kajo Expert Guidance provided by Rivero Scheme Compliance Experts. We found this very helpful and valuable in interpreting and understanding what is requested by the schemes.

How was the user onboarding & training for Kajo?

All we did for user onboarding was to provide the stakeholders with a short and straightforward manual, and that was it. Onboarding people to Kajo went very smoothly for two reasons:

What do you appreciate the most about Kajo?

With Kajo, we can focus our time and expertise on the actual work rather than the admin part of the process, which takes up so much time. In addition, having the Kajo Expert Guidance has been very helpful for us. It is always valuable to read the interpretation of other experts to see if we have the same understanding of a topic, and Kajo Expert Guidance provides us with that.

How was your experience working with Rivero?

It’s been a great experience working with Rivero. The response time is very short. If we have ideas for product improvement, the product owner gladly takes them to the backlog to be implemented without additional costs. This is very different from the usual change request model in our industry. Having worked with several partners and suppliers, Rivero's customer orientation and customer-focused approach is very refreshing.

What would you say to other businesses facing the same challenges in the scheme compliance process?

We have been lucky enough to recommend Kajo & Rivero as a partner to several banks. And if I want to put it in one sentence, I would say: Just go for it. Kajo will make your life much easier, as simple as that. Any player working in the payment industry will significantly benefit from using Kajo.

An Interview With Thomas Carrara Representing the Scheme and Operational Compliance Team at Viseca

Viseca Kajo Success Story

Transforming card scheme compliance with Kajo

We are frequently invited as guest speakers on topics related to payments. Here you will find our latest appearances.

Podcasts

The PaymentTalk podcast hosted our Co-founder & CEO Thomas Müller, where he talked about:

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🎧 The Payment Talk (DE)

Daniela Franzin started her career in the payment industry in 1987. Since the beginning, she has been focused mainly on risk management and risk operations, including fraud, fraud prevention, disputes, debt collection and debt management. Throughout her career, she has led several chargeback teams on both the issuing and acquiring sides. She is Head of Dispute and Claim Resolution at Viseca Card Services SA in Switzerland.

What are the main challenges you see in the chargeback process?

In the chargeback process, we are constantly working against time. Therefore, the primary challenge of every chargeback team lead is to enable the team to process more disputes in less time.

Analysing a dispute involves a few steps, like getting a cardholder statement, preparing the documents, submitting the chargebacks and communicating with the cardholder. All these have to be done on time to meet the chargeback timeline and keep the cardholder updated about the latest status. Failing to do so means losses for card issuers and additional customer calls for the chargeback team.

What makes the ideal chargeback solution from your perspective?

As mentioned, the chargeback process consists of collecting cardholder statements, preparing the documents, submitting the chargebacks, crediting and communicating with the cardholder. While most chargeback tools cover the “submission” part of the process, for me, an ideal chargeback solution should bring all these parts together. Only then can the team work efficiently without switching between several systems and having media breaks between the team and cardholders.

What makes a chargeback team efficient is to be able to:

These tasks can take tremendous time, which can be better invested in analysing more chargebacks and not missing the timelines.

Why did Viseca choose Amiko over other alternative chargeback solutions?

The first time I saw the very first version of Amiko, I could tell that the product had been designed and developed with operational issues in mind. It was apparent that the people who have built this solution understand the chargeback process and the challenges card issuers face.

In addition, we appreciate the open approach of Rivero in involving customers in product development. From the beginning, we have been actively engaged with Rivero. The Rivero team always takes our ideas and suggestions seriously, which we often do not experience in this domain.

What was your first experience working with Amiko?

Amiko is the easiest-to-use chargeback solution I have ever seen. I had 45 minutes of training a few months before we went live. The first time I logged in to Amiko, I did not need to get back to the training materials to find my way around the interface. Amiko is exceptionally user-friendly, intuitive and self-explanatory, and for a chargeback team lead, there is nothing more important than easy team training. Whenever we onboard new team members, we spend about 1.5 hours sitting with them, letting them work with Amiko, and just giving them some tips. After that session, they can work independently and without additional training.

Another thing that excites me about Amiko is how efficient and fast we can work. The user interface is truly designed to do way more with fewer clicks and in much less time. Also, several features such as bulk case creation (to create hundreds of cases at once) and bulk chargeback submission (to submit several chargebacks at once) save us a lot of time and effort.

What do you enjoy or appreciate the most about Amiko?

In my career in the chargeback domain, I have worked with several chargeback applications. However, I have never seen a solution that includes everything. So basically, with Amiko, you have it open in the browser and have everything you need right there. Whether you want to communicate with the cardholder, see the transaction details, prepare the documentation, submit the chargebacks or make the cardholder account adjustment, they can all be done in one place. These capabilities and a user-friendly and self-explanatory interface make working with Amiko and onboarding new team members very easy.

Do you have any results on the efficiency gain to share with us?

We calculated how much time it takes for a chargeback analyst to submit a regular chargeback (with a common reason code) in 3 different chargeback systems: 1) the chargeback application we used before, 2) the portal of one of the payment networks and 3) Amiko.

In our calculation, we also considered the time spent on all preparation needed before submitting the chargeback. The result showed that a chargeback analyst can handle double the number of chargebacks with Amiko compared to the industry-leading chargeback solution. Comparing Amiko with the chargeback portal of a payment network, we can process 2.5 times more chargebacks during the same time it takes on the portal of a payment network.

Time it takes to analyse, prepare & submit a dispute

The efficiency gain becomes even more significant when comparing the time spent submitting multiple chargebacks on the same card, which is quite common, especially for fraud-related chargebacks. Contrary to other chargeback systems, with Amiko, there is no need for repetitive steps, meaning handling ten or more chargebacks takes the same time as handling a single one.

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In our calculations, we focused on the process in the back office (analysing and submitting). For example, we did not consider the time it takes to communicate with the cardholder or adjust the account. Considering those, I expect the efficiency to increase even more, especially once we roll out the Amiko bi-directional cardholder channel and self-servicing.

What is the next feature of Amiko that you will roll out? And how do you expect that to help you even more?

We will roll out the bi-directional channel between the cardholder and the chargeback analysts in a few months. I expect that it will improve the efficiency even more in two ways:

We believe this next step will increase the efficiency of our teams even more. Of course, we will closely monitor how opening such a channel can impact the chargeback volume. To do this gradually, we will first start with the back-office initiated cases, where we reach out to the cardholders for additional input via the digital channel. In the next step, we will then open up the self-servicing part.

How was your experience with the integration project and working with Rivero?

I have one word for it: Excellent! It’s great to talk to people who know what they are doing.

I have years of experience working with service providers, explaining the business needs and operational challenges in the chargeback domain. With Rivero, it has been effortless. We feel that the people building Amiko have a deep understanding of the chargeback domain and listen carefully to the needs and wishes of their customers.

Would you recommend Amiko to other card issuers? Why?

I strongly recommend card issuers consider Amiko and invest in this outstanding solution. I think every card issuer needs to start looking into efficiency sooner or later, and chargeback is one of those processes with great potential. Therefore, I am confident that investment in solutions like Amiko will undoubtedly pay off in efficiency and improve cardholder experience in this process.

An Interview with Daniela Franzin, Head Dispute and Claim Resolution at Viseca Card Services SA

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How does Amiko double efficiency in chargebacks? Why is it only the beginning?

Learn about the operational challenges and risks associated with the fraud & dispute process for banks and explore strategies and best practices benefitting both banks and their cardholders.

Fraud & Disputes

What is Friendly Fraud? And What are the Consequences for Issuers?

The majority of transaction disputes are believed to be caused by fraudulent card usage (

). Among those, the so-called “friendly fraud” or “family fraud” is considered to be the 3rd most significant cause for eCommerce disputes (

Actual fraud is when an illegitimate third party has misused the cardholder’s payment information in a purchase. However, friendly fraud is when a cardholder initiates a dispute on a transaction they have authorised but forgotten or if a family member performed the transaction without the cardholder’s knowledge. While friendly frauds occur across industry sectors, for digital goods & services, up to 90% of all disputes can be caused by friendly fraud (

According to Mastercard, card issuers and merchants incur $15–70 in operational cost for every dispute. Given the costs, operational challenges, and impacts on the relationship with cardholders, issuers have strong incentives to prevent disputes, especially the unjustified ones that resulted from friendly fraud (

Several measures could help issuers in preventing friendly fraud. In this short post, we specifically focus on two approaches we find the most effective.

1) Challenging the cardholder in case of friendly fraud indications

From an issuer point of view, more and more cardholders are becoming aware of the “zero liability policy” of card payments and therefore know about their dispute rights. A good dispute experience can encourage more frequent payments and position a card as “top of the wallet”. However, making it too easy for cardholders to dispute legitimate and authorised transactions can lead to unjustified disputes, such as friendly fraud, which hurts the whole payment ecosystem (

To avoid the operational costs of submitting the chargeback and handling the somewhat likely objections (in the form of a 2nd presentment or pre-arbitration) from the acquiring bank, it makes sense to challenge the cardholder in case of friendly fraud indicators. Some indicators are previous, undisputed purchases at the same merchant, card on file transactions, and digital goods purchases at eCommerce platforms such as app stores.

To balance challenging the cardholder while at the same time maintaining a good relationship with cardholders, having detailed insights on the transaction can provide additional and more substantial indicators.

2) Provide detailed insight on transaction data

In most cases, friendly fraud is raised out of not recognising a transaction. The cardholder raises a dispute simply because they have forgotten about the transaction, the merchant name is misleading, or they are unaware that a family member has performed the transaction. Issuers can avoid this by providing more detailed information on the transaction to help the cardholder identify it or trigger a conversation within the family.

 (a Visa company), it is now possible to provide cardholders with rich and detailed information on a transaction. For example, an alternative merchant name, the merchants’ logo, contact and address details or information about the device used for the purchase. In addition, for some merchants, it is even possible to retrieve a digital receipt, which contains information about the goods or services that have been purchased. All of which can help the cardholder to remember the transaction and avoid proceeding with a dispute.

) provide issuers with much more detailed transaction data from the merchant side. Issuers can leverage the data provided from the merchant side to provide more detailed transaction information in the app or digital channel to reduce cardholder’s confusion about a transaction. In addition to educating the cardholder, integrating such information in the issuer’s application landscape can empower the call centre agents to validate better and/or confirm a fraudulent transaction when talking to the cardholder.

What Role Do Payment Schemes Play in All That?

In a recent announcement, one of the international payment schemes released an announcement that strongly recommends a new way for merchants to share their digital logo with the scheme so that issuers can display it to their cardholders for an improved experience with billing and dispute resolution. For issuers, it will become mandatory to display merchant logos in digital channels. This requirement can be seen as the first step in this direction, and we can expect more of it in the future.

How Can Issuers Provide Such Information in Their Digital Channels and Internal Applications Systems?

There are several ways to leverage the additional merchant information. One way is that issuers directly integrate with the existing APIs offered by Ethoca and Verifi in their digital channels, chargeback and back-office systems.

Another approach (perhaps a lighter & quicker approach) is to use off-the-shelf solutions that leverage such APIs. For example, using a fraud/chargeback dispute solution with direct integration with Ethoca and Verifi can simplify the integration effort in the digital channels of the issuer.

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How Issuers Can Prevent Friendly Fraud: A Fusion of Data & Technology

, we wrote about the importance of chargebacks for card payments and how cardholder self-servicing can turn chargebacks into a pleasant experience for cardholders.

This post focuses on how issuing banks and processors can improve efficiency in the chargeback process by automation and end-to-end digitalisation.

Why is it essential to improve the efficiency of the chargeback process?

With the rapid growth of e-commerce and the increasing number of purchases with debit and credit cards, the volume of fraud and dispute chargebacks are increasing (

). While the pandemic had a big impact, disputes were increasing even before COVID-19 (

). Therefore, an efficient process with quality assurance to handle the increasing volume of disputes is essential for the continuity of this process.

Most issuers agree that their existing internal processes and chargeback solutions used do not allow the process to run efficiently, and thus they are looking into improving it (

). Without an improvement in the process and tooling, there is a risk of loss (e.g., increased write-offs) and increasing personnel costs (

Every step of a chargeback life cycle (from issuer-merchant collaboration (Ethoca & Verifi) to Arbitration) has a timeframe and a deadline. The better issuing banks can optimize the process, the faster and more efficient the chargeback team can work. As a result, fewer deadlines are missed, and the issuer will bear less loss (from write-offs).

A better chargeback experience translates into improved cardholder satisfaction.

An efficient dispute and fraud process can enhance customer service and enable issuing banks to stay ahead of the competition. In addition, with an efficient process, the protection offered by chargebacks can be highlighted more prominently as an advantage of card payment, leading to card portfolio and transaction volume growth.

How to improve efficiency & save cost in the chargeback process?

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The enormous potential of the chargeback process for efficiency gain: A short guide for Issuing Banks

Amiko empowers card issuers to make their chargeback process more efficient, equipped with self-service options for cardholders. With Amiko, Viseca enhances both its customer experience and back-office processes.

Amiko empowers card issuers to make their chargeback process more efficient.

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Viseca Partners with Rivero for Digital Chargeback Solution

The importance of chargebacks for card payments

Payment networks like Mastercard, Visa, and Amex have established chargeback processes with a zero liability rule to protect cardholders in cases of fraud or when there is a problem with the merchant fulfillment of the cardholder’s purchase. While the process is in place and the cardholder’s rights are protected, going through a chargeback process is an effortful and sometimes stressful experience for the cardholder.

In this first article of a series on chargebacks, we look into how payment card issuers and /or banks (from now on, “banks”) can turn these stressful experiences into positive ones and, by doing so, gain customer loyalty and increase customers’ trust in their payment products.

Today’s chargeback experience for cardholders

Thanks to digitalization in banking, most banks now offer digital interfaces (apps or portals) so that their customers can see their transactions and benefit from digital banking services. This means that cardholders might notice a fraudulent transaction on their card earlier than the bank’s fraud team manages to reach out to the cardholder, or they are immediately aware of a problem with a transaction.

As soon as the cardholder notices a problem with a transaction, they try to reach out to the bank to report it. From a cardholder’s perspective, the process should be done after reporting the problem. However, typically, it takes more than just a simple call or e-mail to customer service. For example, for a fraud case, the process involves talking to the call centre, then talking to someone from the fraud department to answer a few questions, then receiving a letter from the bank to confirm that the reported transaction was fraudulent and sending it back to the bank. For a dispute with a merchant (e.g., service/product not delivered), the process involves filling out a long, complex form and sending it with information on the purchases, previous communication with the merchant, etc, to the bank. Due to process lead times and the response periods for merchants, customers then have to wait for several weeks until they get feedback from the bank.

The chargeback process at the bank starts by reimbursing the cardholder on a provisional basis, filing a chargeback towards the merchants’ bank, and issuing a new card for the cardholder in case of fraud. There might be some back-and-forth communications (often letters) between the bank and the cardholder for additional information or confirmation. Depending on the work backlog of the bank, this process can last anywhere from a few days to a few weeks or months.

Nowadays, customers have much higher expectations regarding the response time to their requests. We live in an era of on-demand services, quick responses, and real-time status updates. However, when it comes to the chargeback process, which has been established in the first place to benefit cardholders, the experience is far from quick and pleasant; on the contrary, it can lead to frustration and negative emotions for cardholders. As this happens in an already stressful event, the bank should aim to reduce friction and cumbersome administrative hurdles.

Turning chargebacks into a cardholder self-service with a pleasant user experience

Leveraging digital channels for cardholder self-servicing

In the same way that the cardholder sees a problematic transaction in their banking app or portal, they could also report it to the bank. However, this does not mean merely offering the cardholder a digital version of the existing chargeback form to fill out. Instead, the cardholders should be guided in an easy way and in the language that they understand. The required information and the cardholder’s statement regarding the transaction can be collected and automatically verified through such a conversation. In case of a legitimate claim, a digital fraud or chargeback case can be created and displayed to the chargeback analyst at the bank to start working on it. This means an end-to-end digitalization of the process from the cardholder to the chargeback analyst, thereby eliminating administrative hurdles such as letters, calls, or emails and reducing friction.

Such a conversation can be designed in a way to improve the cardholder experience but also to avoid unjustified disputes. As a result, the information collected from the conversation can help to avoid unnecessary follow-up communications with the cardholder. Resulting in a win-win situation for both the cardholder and the bank.

Keeping cardholders updated throughout the process

As mentioned above, the current process may take up to a few months, especially a dispute with a merchant. This usually results in follow-up calls from the cardholder to inquire about the status of their dispute, which means an additional workload for call centres. When the process is fully digitalized end-to-end, any update on the dispute can be automatically communicated to the cardholder in the app or portal to avoid unnecessary calls. In the same way, the digital channel can be used to collect additional information from the cardholder, if needed, throughout the chargeback process.

Implementing and using such a bidirectional conversation channel is a fundamentally different approach than the commonly seen concept of turning an existing chargeback form into an online form.

Acting even more proactively and avoiding fraudulent transactions

While chargebacks are not limited to fraud chargebacks, statistically, the majority of chargebacks are driven by fraudulent transactions. With the advancement of fraud detection systems, the bank automatically detects most fraudulent transactions, and then the cardholder is contacted by the fraud team by telephone or letter. Reaching out to cardholders is usually not easy or quick. With a digital channel in place, the cardholder can be contacted via a push notification to the banking app to confirm whether a transaction is fraudulent. In the case of confirmed fraud, the chargeback and recovery process can be started without the cardholder's initiation.

Besides an improved customer experience, this quick feedback process helps banks train or adjust their fraud prevention models on more accurate data and prevent similar fraud patterns on other cards.

The future of chargebacks can be far better than what it is today. While the actual chargeback processes offered by banks today are cumbersome, frustrating, and inefficient, there is an excellent opportunity to turn it into a pleasant customer experience that will increase customer loyalty and strengthen the value proposition of card payments.

Helping the cardholder or even positively surprising the cardholder in the context of an effortful and stressful event, will be remembered and valued.

If you want to leverage the hidden potential of chargebacks and turn them into a USP for your payment cards, check our website and contact us.

In the next article of this series, we will explore how digitalization of the chargeback process can improve productivity in the back office process in terms of efficiency and speed of handling the increasing volume of chargebacks.

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How to delight your cardholders when it counts the most? The case of fraud & disputes

Gain exclusive insights into the evolving world of payments that are reshaping the banking sector and enhancing customer experiences.

Thought Leadership

Recently Apple announced “Apple Card” as a credit card designed to be used with Apple Pay on Apple devices. Obviously, this is a very interesting topic for banks and issuers and the announcement raised several questions on how the product works, what the technology behind it is and if Apple is now becoming a bank.

In the 24 hours after the announcement, we did our research to answer the top 10 questions that have been raised on this topic. We intend to update this blog post as we learn more and as more information becomes available.

Apple Card is a Mastercard credit card digitally held in the Apple Wallet. It will be supplemented by a physical Mastercard titanium card with an EMV chip for card acceptance environments without any support of contactless (NFC) technology at the POS (where Apple Pay can not be used).

Based on our current interpretation, the Apple Card offering contains different (virtual) card numbers and tokens to serve all payment use cases:

Due to the fact that all generated tokens are linked to the virtual card number and all card numbers are linked to a single payment account at Goldman Sachs, this set-up enables a holistic view on all transactions and enables the announced features around flexible payment plans and dashboards of spendings for cardholders.

It is not possible to know the exact set-up at this point in time but here is what we gathered from a screenshot of the ad video:

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Like other Apple products, they focus on simplicity and user experience. Apple Card is different from other credit cards in a way that it is a “digital first” card, with a strong focus on digital payments and tokenization technology behind it. The titanium physical card only comes as a fallback solution wherever Apple Pay is not available.

Apple Card comes with some interesting features such as easy onboarding, analysis of spending as well as an estimation of the interest to be paid by the cardholder (US specific).

We think one of the cool features of Apple Card is the real-time fraud protection that notifies a cardholder about suspicious transactions and ask for feedback on the flagged transaction.

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Additionally, by using machine learning, Apple will translate confusing merchant names and codes into meaningful insight so that the cardholder can recognize the merchant and the transaction. We have to admit that while this is a very useful feature, it is not totally new and some challenger banks like Monzo or fintechs like Contovista are also already doing it.

No, Apple decided to partner up with Goldman Sachs bank in the USA to issue Apple Card. This business model is widespread in the payments market (often used by retailers and airlines) and usually called “co-branding”. The entity issuing the card (means holding the Mastercard license, holding the regulatory required licenses, maintaining the payment account and being the contractual partner of the cardholder) is Goldman Sachs only. Apple is used as a sales channel, a technology provider and as a pass-through wallet provider (Apple Pay) but is never involved in the transaction process and/or the flow of funds.

4. Is there revolutionary technology behind?

No, all the features used by Apple and Goldman Sachs already existed in the market but Apple obviously did a very good job puzzling together and leveraging technology of Mastercard and other solutions available in the market.

Backbone of the product is Mastercard Digital Enablement Service (MDES) to allow the card issuer Goldman Sachs to tokenize a card number and therefore “multiply” a single card number to many tokenized card numbers.

Not printing the card number and the CVC2 on a physical card but to show them only in the Apple Wallet App is as well nothing new and already in use with several card issuers offering so called “virtual cards”.

So far the product is announced by Goldman Sachs and Apple for the US market (and US cardholders) only. Due to the fact that card issuing is subject to corresponding licenses in most markets, globally it will be interesting to watch if Goldman Sachs will work on a global roll-out or if Apple is going to partner with other banks/payment institutions for markets outside the US.

In addition, it seems like it is a premium product, not only because of the card being made from titanium, but also it seems like Apple has quite tight credit score checking and they are targeting the high-end customer category. Most likely iPhone users who can afford to spend way over 1000 USD for an iPhone XS with fall into the eligible category ;-)

Apple Card will be available this summer in the US. It seems that the whole solution is tightly integrated with the processing platform and operations of Goldman Sachs. Therefore, we think that it won’t be easy to bring the same setup to other countries soon (e.g. the US payment market works on a single message system, the european market on a dual message system). In the announcement, it was mentioned that Goldman Sachs was a good choice since they were mainly an investment bank with a very limited retail customer base (recently launched Goldman Sachs digital retail bank “Marcus:”). Therefore, the partnership can be seen as a win-win for Goldman Sachs and Apple. However, it is unlikely to be a winning case for banks with existing retail customers.

 as an indication, which was launched in partnership with the Green Dot Corporation as a US-only product in late 2017, there is no solid information if an when this product will be available in other countries.

7. How does this all relate to Apple Pay Cash card?

The Apple Pay Cash card, a virtual prepaid card issued in partnership with the Green Dot Corporation, was introduced in late 2017 in order to bring Peer-2-Peer (P2P) payment to Apple Pay.

Now with the announcement of Apple Card, people might ask how Apple Card is then different from the already available Apple Pay Cash card. The main difference is that Apple Card is an actual credit card while Cash card is a prepaid card mainly used to store money received via P2P payments. The two products will coexist and the way they work together is that the (1%-3%) cashback reward that cardholders get by using Apple Card will be credited to Apple Pay Cash card and can be spent wherever Apple Pay is accepted (in-store as well as online). Also the Cash card is still used to send and receive money via iMessage.

Considering Apple’s attention to detail and focus on simplicity, this coexistence is an unusual compromises and certainly not a great user experience. However the Cash card allows Apple to offer P2P payments all US customers, regardless of their banks support for Apple Pay. Also it allows them to implement P2P without having to rely on the P2P rails from Mastercard and Visa (‘MoneySend’ and ‘Direct’). Probably these strategic values were more important than the very best user experience. With Apple Card being available soon, it is to be seen if these two products will be merged into one at some point down the road.

For the physical titanium card Apple made some interesting decisions. The card only shows the logo of Apple, Mastercard and Goldmann Sachs. No card number, no magnetic stripe, no expiration date, no CVC security code and no signature. Which means the card itself can only be used with the Chip and PIN at the POS. The card number, expiration date and the CVC will be displayed in the Apple Wallet App. We assume however that a CVC is only available for the virtual Apple Card number and not the card number that is personalized onto the chip of the physical card. By limiting the physical card to POS transactions, the fraud exposure is very low. This means that with the exception of loss and damage, there is no reason to replace the card, which makes sense considering the cost of the blank card made from titanium and the announcement that there will be no annual fee for the card.

Apple Card.webp

Also the card doesn’t support contactless payments (NFC). One might assume they removed the NFC interface because cards made from metal can pose an extra challenge. Also it is possible that they have done it in order to prevent against extracting the card number via NFC, if the card is lost or stolen. However it’s way more likely that this was a deliberate decision to trigger the cardholder to use Apple Pay whenever contactless payment is available. Also the fact that for payments with the physical card there is only 1% cashback (instead of 2–3% with the virtual Apple Card) points to this direction.

While all of this together is a fresh approach, it’s actually mainly about removing features from the physical card combined with great marketing to highlight the security advantages that come along with it.

With regard to privacy, according to the information released by Apple, Apple claims that they don’t have access to transaction data and that the data is only stored on your iPhone. However, of course Goldman Sachs as the issuer will use the data to operate the Apple Card.

Limiting the physical card to an EMV Chip only card can still cause acceptance issues, especially in markets where not yet all merchant POS terminals are EMV capable and magnetic stripe technology is still in use. Moreover, not embossing the card number and cardholder name could limit the usage of the card in certain niche-acceptance environments like for example car rental where a lot of merchants still work with embossed card data.

The physical card also does not include contactless technology because obviously for contactless transactions the iPhone with Apple Pay technology is intended to be used. Even though this means a cardholder should always carry his mobile phone, going to a shopping trip with the physical card only is probably not a good idea.

So far, Apple and Goldman Sachs did not talk about a PIN but for the physical EMV card there will be a PIN (most likely an online and an offline PIN) for transactions at POS terminals and ATMs. The PIN and the PIN handling is expected to work like for all other cards in the market (PIN generated by Goldman Sachs and sent to the cardholder). The EMV technology and security framework does not allow for a lot of fancy features, which means an Apple Card cardholder still has to remember his PIN when using the physical card. But of course Apple can choose to also provide an option to reveal the PIN in the Wallet App, like some challenger banks do it already.

10. Is Apple Card a threat or attack on banks?

We think that the partnership with a big incumbent (Goldman Sachs) is a clear signal that Apple still believes in traditional financial institutions. Considering that the financial market is a highly regulated domain (with all KYC, anti-money laundry, cross border etc), we think that being a bank would slow down Apple and therefore is not very attractive for Apple. And if Apple really wants to be a bank, they can simply buy one. Therefore, we believe that it was a deliberate decision by Apple to focus on facilitating payments by going into a “co-branding” agreement with Goldman Sachs.

Apple’s move to the payment domain is an obvious attempt to lock in customers even tighter in the Apple ecosystem and can be seen as a great example of how a company can be a relevant player in the financial industry and win the customer interface without actually being a regulated bank.

On Apple Card web page, Apple is teasing banks by saying “When you want to see how much you’re spending, there’s no need to log in to a separate website or app”. We see this as a wake up call to financial institutions to start providing similar features in order to not become ‘dumb ledgers’, which is a similar threat to what the telecom operators are still facing to not become ‘dumb pipes’.

With Apple Pay and now Apple Card, Apple is actually entering into the payment channels. The features Apple Card is offering are very comparable to those of challenger banks, such as Monzo, Revolut and N26. Therefore, in the sense of attacking banks, Apple Card might affect challengers even more than the incumbents. Nevertheless, Apple’s move also clearly shows that the challenger banks followed the right path by first launching a payment product with interesting features and simple on-boarding and then evolving from there.

Regardless of whether Apple is now a threat to banks or not, we don’t believe that Apple has the intention to become a bank in the near future.

We hope that we have answered some of your questions in this blog post. Please share your thoughts and insights with us and if you found this post helpful, please share it with those who might also be interested in this topic.

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Recently Apple announced “Apple Card” as a credit card designed to be used with Apple Pay on Apple devices. Obviously, this is a very…

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Apple Card Uncovered-Top 10 Q&A

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