Fascinating Words: Charlie Stross on Apple, the Bank

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Apple Pay, circa 1776?

There are lots of dimensions to the Apple/FBI tousle, but Charlie Stross uncovered one that I didn’t know about, the speculation Apple is going to be your solution to banking (as Amazon is to buying books). And it has technical resources no bank in the world could match.

From the piece at http://www.antipope.org/charlie/blog-static/2016/03/follow-the-money-apple-vs-the-.html

Well worth reading in full, if, like me, Apple’s every move in object of morbid fascination.

Ultimately the banks are going to discover—the hard way—that getting into bed with Apple was a bad idea, about the same way that getting into bed with Amazon over ebooks was a bad idea for the Big Five publishers. Apple is de facto an investment bank, right now: all it needs is a banking license and the right back end and regulatory oversight and risk management and it will be able to go toe-to-toe with the likes of Chase or Barclays or HSBC as a consumer bank, too. And Apple has a very good idea of how risky their customers’ behavior is because unlike the banks and the credit card settlement network they’re not running on incrementally upgraded legacy infrastructure designed in the 1950s. Note those two words a couple of sentences ago: “risk management”. Banks are not in the business of holding your money or making loans; they live or die by how well they manage risk. Apple, like Google, has a much richer relationship with their customers than any bank. They can (for example), with a customer’s position, know roughly where the customer’s phone or watch is moving, and thereby spot faked payment credentials if someone clones the device and tries to use it to buy something a thousand miles away. The CC networks have velocity checking but it’s a really crude metric for spotting fraud: Apple can massively improve on it.

Some of his speculations are a little out there (iPhones doing retina scans and matches with genomic info for bio-metric authentication). Still, it’s a very thought- provoking piece, and good comments.

I do wonder what organizations with vast amounts of data about peoples’ personal and financial lives do with it for the “long game”; and it would seem that Discover + Amazon may be ahead in this particular race. Personally, I always thought airlines would create some de facto new currency based on frequent flyer miles. In some ways, liquid currency, payable on demand was just a solution to an information and convenience problem. People didn’t want to haul around goats for every transaction and trade them for crops. Computers presumably solve this problem painlessly.

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