Apple Presses Tencent to Close Payment Loopholes

Hey Payments Fanatic!

Apple has demanded that WeChat parent Tencent and Douyin parent ByteDance stop allowing in-app creators to direct users to external payment systems. According to Bloomberg, Apple has threatened to reject updates for WeChat and Douyin if these loopholes remain.

An Apple spokesperson stated that their guidelines require all digital goods to be sold through Apple's system, and violations may lead to app rejections.

Tencent agreed to remove links that let mini-game developers bypass Apple’s payment system but resisted disabling an in-game messaging feature, citing its importance for user experience. ByteDance complied with Apple’s request to close similar loopholes on Douyin.

Apple's enforcement aims to maintain app quality and security but also comes as it faces regulatory scrutiny globally and challenges in the Chinese market. A standoff with Tencent, a key player in China, could add to Apple’s conflicts.

In July, Apple sought to amend a Chinese court ruling that referenced its "dominant position" and "unfair pricing," highlighting its delicate situation in the Chinese smartphone market.

Additionally, the European Union announced on July 11 that Apple would open its mobile wallet technology to competitors to avoid fines.

In India, Apple was accused of abusing its dominant position in the app store market in July, further illustrating its global regulatory challenges.

To be continued...

Cheers,

Marcel

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INSIGHTS

📊 Checkout.com, a leading global digital payments provider, announced the results of its commissioned 2024 Total Economic Impact™ (TEI) study conducted by Forrester Consulting. Access the full report

PAYMENTS NEWS

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🇺🇸 JPMorgan Chase is considering taking legal action against the Consumer Financial Protection Bureau (CFPB) over an ongoing probe into the abuse of Zelle payments by scammers. In its recently released financial statements, JPMorgan notes the ongoing inquiries by the CFPB into the issues raised.

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GOLDEN NUGGET

𝐂𝐚𝐫𝐝 𝐯𝐬 𝐃𝐢𝐠𝐢𝐭𝐚𝐥 𝐖𝐚𝐥𝐥𝐞𝐭𝐬 — how Digital Wallets bypass banks and card networks saving interchange fees for merchants and consumers 👇

Digital Wallets are challenging the Consumer-To-Business (C2B) payment ecosystems, including cards with their on-us approach.

There are 3 main types of digital wallets:

🔸 𝐏𝐚𝐬𝐬 𝐓𝐡𝐫𝐨𝐮𝐠𝐡 𝐖𝐚𝐥𝐥𝐞𝐭𝐬 — (ApplePay, Google Pay) — commonly mobile device-oriented solutions that enable customers to make payments both in physical stores, using tap-to-pay functionality, and online. These wallets typically use tokenization to create a secure, digital representation of the customer's physical Visa card.

🔸 𝐒𝐭𝐨𝐫𝐞𝐝 𝐕𝐚𝐥𝐮𝐞 𝐖𝐚𝐥𝐥𝐞𝐭𝐬 — (Cash App, Venmo) — similar to prepaid cards, as they allocate a separate "account" to each customer. Users can load funds onto this account, then, once the account is funded, customers can engage in transactions with sellers who are part of the digital wallet's platform. It operates as the Merchant Of Record (MOR) in its own ecosystem.

🔸 𝐒𝐭𝐚𝐠𝐞𝐝 𝐃𝐢𝐠𝐢𝐭𝐚𝐥 𝐖𝐚𝐥𝐥𝐞𝐭𝐬 — (PayPal, Alipay, Amazon Pay) — operates by using multiple "stages" to complete a transaction, consisting of a "funding" stage and a "payment" stage. Essentially, the wallet acts like an intermediary in the transaction process. With a staged wallet, the card issuer or card network may not have access to specific card details or other pertinent information. It is the MOR in all transactions.

𝐂𝐥𝐨𝐬𝐞𝐝-𝐋𝐨𝐨𝐩 𝐖𝐚𝐥𝐥𝐞𝐭𝐬

🔸Definition: Digital payment systems restricted to a specific network of merchants or services.

🔸Usage: Only usable within a specific ecosystem (e.g., Starbucks app).

🔸Benefits: Enhances customer loyalty, integrates rewards and promotions.

🔸i.e.: Starbucks Mobile App, Walmart Pay

𝐎𝐩𝐞𝐧-𝐋𝐨𝐨𝐩 𝐖𝐚𝐥𝐥𝐞𝐭𝐬:

🔸Definition: Digital payment systems usable across a wide range of merchants and platforms.

🔸Usage: Can be used at any merchant that supports the payment method (e.g., Apple Pay).

🔸Benefits: Broad acceptance, versatile, links various credit/debit cards.

🔸i.e: ApplePay, Google Pay

Note: A closed-loop wallet can become open and vice versa, an open-loop wallet can also adopt a closed-loop model.

The card payment authorization flow involves a minimum of 9 steps, at times more & is subject to interchange, assessment & PSP fees. A closed-loop wallet bypasses the issuer (interchange) and card networks (assessment) fees, making this an attractive solution for merchants and giving them more bandwidth to create advantageous loyalty programs.

If you could move forward with 1 initiative, create a digital wallet, or launch a co-branded card, what would you choose & why?

Source: Ark Investment Management Ltd, Checkout.com & Howard Xiao

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