Apple figured out a new way to lock users in. The appleCard!

Computer company offering consumer products. Sure.

Computer company having its own storefronts and online store. Done.

Computer company offering their own media services. Ok.

Computer company offering a credit line to encourage purchasing... Fine...

Computer company becoming its own credit card company........ ?

Ok, this is something new.

The big three credit card companies, well two are processors, and banks license the name and ability to use the processing of the brand ( MasterCard and Visa.) These two and American Express ( who is a true credit card company bank and processor) all originated directly from the banking industry.

Discover was the creation of Sears which at the time was the most powerful and richest retailer in the United States. Sears pioneered the use of a credit line to encourage people to use Sears as their primary store. This allowed Sears to become one of the most powerful companies in the world. In the late 70s, Sears started to expand its internal credit processing network to compete with the other processing based banks through a self-funded credit card called Discover.

Discover disrupted the market due to its lack of fees, high credit limits, and generous rewards programs. This move, while revolutionary to the credit card industry led to the downfall of Sears. This and other company decisions led Sears away from their core market of being a retailer. They were not able to see the slowing use of malls and the rise of online purchasing. Eventually, Discover was sold off and thrives to this day. One can argue that other than dead hub stores in malls, Discover is the only remaining portion of Sears left.

Now Apple is getting into this game. They have created a credit card that is dependent on their consumer technologies for use. The card is intended to be a market disrupter with a focus on privacy. The card has none of the traditional features like a number, CVV, expiration date, or signature.

Since the focus is on privacy, all that is done on the back-end is transaction approval or denial. All information about the purchase is stored locally in the Apple Device and not in external servers.

The technology is highly dependent on Apple's Apple Pay NFC system that is becoming more common. A physical card will be available but will require an Apple device to be present for the transaction to take place.

Well, good luck. I can already see that Apple will embed this into all of their mainline products and it will be successful simply due to the number of users out there. More device lock in for Apple, which means more devices sold. Switching to Android will not only mean buying new apps and migrating your data, but it also means switching to a new credit card company. Well played Apple. This ensures that Apple will only have to put out a functional level in their product line to guarantees customer retention.

Personally, I do not want to be the person behind someone in line trying to get not only the watch to work with the credit card terminal at Walmart, but also making sure that the app on their phone is working correctly. If this is successful, I see Capital One building something similar that will be cross platform and just work.

Credit Card Number Modulation for the Common Man

A long time ago, Paypal used to offer one of the coolest possible features out there, the ability to create a debit card number that is either tied to a single vendor, or for use as a one-time transaction.

The obvious use for this was to protect your account from fraud if the site was ever compromised.

My preferred use for this was to create a merchant tied account that I could cancel once I decided that the business relationship was over. One of the really crappy things common today, when you try to end a business relationship, is when the vendor insists on playing games with you by continuing to charge your card or add some insane charge at the end that will require hours on the phone with them to resolve.

A common use for credit card number modulation is canceling your cable bill or other hard to cancel service. Instead of waiting on hold and then putting up with an annoying sales pitch. Call their retentions department, tell that person you are canceling your account and get their operator id number. Ask them where to return the equipment if needed. As soon as they start their retention bit, cancel the credit card. Once verified, nicely tell them that you have canceled the payment account and this conversation is over. Next, write up a simple document to the company's legal department with the operator's id number and contents of the conversation. If you are returning equipment, include a copy of this document taped to each piece of equipment. Also fax/mail a certified letter to the company's corporate number/address to the attention of the legal department. 

Why should you go through this trouble? Because the company will slam you with fees and send you to collections since they can not charge it to your card. Direct TV tried this with me and this process with PayPal saved the day. 5 years later and I still get collections calls for my direct tv account that was canceled since I moved to a location that did not have a view of the southern sky. Each new collector gets a nastygram warning them to stop and that I will sue them if they continue. I also attach the cancelation fax, judgment letters and redacted check stubs from previous collection companies that I have sued in small claims court and won $500 - $2000 each time.  It does not stop them, so it is a source of income every year or so.

My other use for credit card modulation is one time numbers. This is really handy for transactions where you do not trust the company for any length of time longer than this specific transaction. In my case, I use this for buying bitcoin and usenet feeds from international vendors. 

This was all great until about three or four years ago when Paypal was forced to drop the service. MasterCard and Visa immediately added this service but either made it part of their premium card service or charged to have each number created. 

In recent months, companies have started to address this gap. The one I am working with right now is Final Card. This is a credit card for good to excellent credit scores. Final Card focuses on credit card security. This is not a premium card so I am not sure if it is a good idea to rent a car on this. However, it is an excellent card for the use of its number modulation. Within minutes of approval, you will have access to their app and web page with the ability to generate card numbers. I quickly switched all of the accounts that I pay via my preferred Capital One Venture card, to their own specific vendor locked Final Card.

So far I am happy with the service. I will update this in the future.

If you are interested here is a link to the card.  Final Card.