Apple Pay and ePayment Regulations in Southeast Asia

Apple Pay

Apple Pay

Apple Pay’s unsung hero: The payment token standard.

Less than 48 hours ago, the inevitable became reality. Apple launched the iPhone 6 and gave it contactless and card-not-present payment capability on its new service named Apple Pay. During the launch event in Flint Center, Apple shared with the world that the Apple Pay will not transact using the original card account number but rather a “one-time payment number”.

Where exactly did this come from?

Rewind half a year ago, EMVCo, the same body responsible for developing and maintaining the EMV chip card standards released a payment tokenization specification which was pretty much a “donated” piece from the major payment brands (i.e. Visa, Mastercard, Amex). In a nutshell, this framework allowed for one-time use account numbers to be generated for a specific transaction or merchant. Data compromised? No problem – the stolen data has no resale value. Not many people were aware at that time that this would become the cornerstone for major third party adoption – more specifically, Apple. At that time, some even questioned the need for another token standard.

The consumer experience

Tech savvy consumers may have yearned for Apple Pay’s user experience for the longest time. At the retail store, contactless payment using mobile with fingerprint as the cardholder verification method. Similarly, a one touch/click approach to pay online using the same cardholder verification process.

What are the challenges?

Years ago when magstripe counterfeit card fraud was a big problem, banking regulators in the region implemented requirements for banks to adopt chip cards (mostly on EMV standards) to prevent counterfeiting. Kudos to Bank Negara Malaysia, Monetary Authority of Singapore, Bank Indonesia and Bank of Thailand for spearheading the chip rollout as this helped bring down the card-present fraud drastically. In more recent years, efforts by regulators are focused on reducing lost & stolen fraud (a much smaller problem than counterfeit cards) through mandating PIN @ Point-of-Sale. Malaysia is scheduled to rollout in 2017. Indonesia to start with credit cards in 2015.

Regulations that exist today remain a hurdle, albeit a small one, for banks in SEA to get on board with Apple Pay. Waivers will likely be necessary as means to get around existing “Chip” mandates as well as the upcoming “PIN @ POS” mandates.

While payment card regulations are black & white, the lines between card-present and card-not-present is getting more grey by the day. The term “card” is also something that is becoming irrelevant as electronic payments evolve.

Winds of change

Barely a month ago, EMVCo announced to the public of their new branding. Gone is the old “chip” logo in favor of a new theme of worldwide payments through new and emerging technologies. Changing with the times indeed. And tokenization is surely just the start of it.

New vs. Old

emvco_web_logo  VS.  emvco_logo


Just like EMVCo, regulators and regulations will need to change with the times.

Consumer demands will drive natural acceptance. It’s likely a win-win for (almost) everybody.

As a start, banks in the region will need to get their head around understanding the transaction flows and implement processes to provide the assurances to the regulators that this new payment method is every bit as secure, if not more secure than the traditional ways of transacting payments. The pressure is certainly on from here given that consumers are already asking when Apple Pay will be made available in Southeast Asia.

Conceptually, it appears that Apple is on the right track when it comes to consumer experience, payment security as well as gaining acceptance from various stakeholders. Acceptance has always been the biggest challenge for many new players in this space and is an area where many have failed. With Apple Pay, banks and the global payment brands will be quite happy to play along as they get to maintain their individual branding. The clear winners from Tuesday’s announcement would certainly be the consumers, merchants, banks and global payment brand members of EMVCo.

How all of this is going to affect domestic/regional-level payment networks is something that we will all be watching very closely.


– Sean Lam



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11 Sep / 2014

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