February 17, 2015
Editors Note: This article was written long before Apple Pay was launched. This article is primarily about the potential Apple had for Payments.
This was actually a rather long journey for Apple. To craft the magical experience that you and I now see at the iTuens store was not close to being trivial. To gain a perspective, as always one should, we will present the historic perspective. This will help establish how Apple got to be into Payments and perhaps where it is going.
Warning: Jump to the last paragraph if you are a TL;DR person, as I am sure what follows will be horrifying.
Steve vs. The Record Labels
Throughout most of 2002, Steve Jobs and his team were crafting what we now know as iTunes. Steve was in many cases personally negotiating with the major record labels on how the service will actually help the music industry. The price per song he established primarily from a psychological standpoint. At first most of the record labels did not accept a fixed price, let alone one that was not set by them. The price point of 99¢ for a hit single was frightening to the industry. Clearly they wanted more, much more.
Steve vs. The Payment Card Companies
This was not the only issue Steve faced. This issue always seems to be missed by most writers and researchers of Apple's iTunes success. The price point of 99¢ was not aligned with the Interchange Rates (http://en.wikipedia.org/wiki/Int...) established by Visa and MasterCard. Steve logically assumed that there had to be a price structure to support micro transactions and if there was not, he would will it in to existence. I was on a team of outside advisors that had to break the news to Steve about how Visa and MasterCard set rates and how, at that time they did not cut any side deals.
There were some negotiations with both Payment Card companies but they really did not go anyplace. Thus our group suggested the Payment Card Aggregation method for billing that is still in use today. This is based on a dynamic computer model of buying habits of ...