Apple Pay: The 5 lessons it teaches IT and business alike

Tired of being ineffective and unloved? It's time to act different

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That's a great opportunity for a provider -- I mean you, IT -- to come in and solve the problem the participants couldn't or wouldn't. In this case, Apple is acting as proprietary as MCX and Isis, but Apple has something no one else has: a huge, loyal customer base that spends money. It leveraged that fact to get rapid (by banking standards) adoption of its offering.

Apple did the same with the dysfunctional music industry via iTunes and the iPod. It did so with dysfunctional cellular carriers, by forcing them to let Apple manage the upgrades, preventing carriers from imposing or messing with services, and even convincing the carriers to support pay-as-you-go iPad plans. It may do the same with payments, using existing methods in a better package. (My prediction: Apple's gearing to the do the same to at least part of the highly dysfunctional health care industry.)

Chances are the dysfunction you can address is nowhere as gnarly as what Apple faced in the payments and music industries, but the approach is the same. Still, few others will really try.

Lesson 4: Disrupt inclusively

When an industry is so badly broken and the pain has grown unbearable, an outside knight can come in and not only fix the problem but do so largely on its own terms -- as Apple did with iTunes, the iPhone, the iPad, and now Apple Pay. But the knight has to have solved the whole problem and in a way that doesn't eviscerate the existing industry. My friend Bud Mathaisel, former CIO at Disney and Ford, calls that "inclusive disruption."

In the case of iTunes, Apple provided the digital rights management the industry demanded, a key concern in that Napster era, and the music industry felt its property ownership was being maintained. For the iPhone, in return for Apple controlling the environment, the carriers gained a passionate audience and assurance from Apple that no updates would go out that broke their offerings. With Apple Pay, the retailers and the banks make the same money as before, even after Apple's cut (the reduced fraud pays for Apple), and they probably will get the public and politicians off their backs.

Contrast this to Google Wallet: Each carrier decided whether it supports Google Wallet, there's no standard, assured security system on the devices themselves, and Google wanted to get the transaction data that retailers fiercely guide for their own use. Although its HCE token approach was similar to MCX's and Apple Pay's, Google had neither a whole solution nor the leverage needed in any part of the affected markets -- even a dysfunctional market will try to keep to the failed status quo rather than give up control. You need both the solution and the leverage.

The other industry efforts' business models are more poisonous, designed for the interests of one party, not the whole ecosystem. That means there require immediate, clear losers to gain adoption.

The telco-led effort called Isis Softcard that is similar to Google Wallet technologically but charges banks each time a user loads a credit card, rather than each time it is used. That greed has alienated major issuers like Capital One.

Worse, MCX members are forbidden from using other mobile payment systems in their stores, and some such as a Best Buy are actually removing their NFC terminals as a result. To add insult to injury, MCX's CurrentC system won't work with credit cards or debit cards; you have to link it to your bank accounts directly. Why? So the retailers avoid paying processing fees. How many people do you know who will jettison those cards? In this case, retailers' greed has caused banks to ignore it (they lose credit and debit fees if they adopt CurrentC) and will cause users to ignore it (bank transfers have fewer consumer protections and are less convenient).

And Google Wallet required merchants to share transaction data with Google (remember, Google makes money through data mining), which made Google a competitor to those retailers' own data-mining efforts.

Apple is no angel: Competing payment systems can't use its Secure Element chip nor infrastructure, and retailers can't use Apple Pay on non-Apple devices or in their own apps (for physical transactions) to create a universal standard. But they can use standard terminals, mine transaction data, and keep their same profits.

What Apple knows how to do that you should, too: Disrupt inclusively.

Lesson 5: Technologists shouldn't solve just technology problems

If you work in IT, you probably don't pay much attention to the business issues notes in Lessons 3 and 4. But that's one of the key lessons from Apple: Problems are rarely only technological; therefore, their solutions aren't either.

Your approach should be multidisciplinary, even when technology-centered. I don't mean the usual nonsense about getting close to the business, embedding IT in the business, and bridging the IT/business gap -- at most companies, those have become meaningless phrases for pretend efforts.

If you're a real team, you have specialists in the appropriate disciplines working together as a real team, not as simply a collection of agents for others. That true team will propagate and involve the departments representing the various affected disciplines. But it has to be an empowered team, not a committee.

Copyright © 2014 IDG Communications, Inc.

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