Apple Pay And The Fed – What Does It Really Mean?

Apple Pay is joining EMV chip-and-PIN as a standard for roughly 9 million Federal payment cards, including debit-card accounts used for distributing Social Security and Veterans benefits, Bloomberg News reported.

On Friday (Feb. 13), the White House announced that “Apple, Visa, MasterCard, Comerica Bank and U.S. Bank are committed to working together to make Apple Pay, a tokenized, encrypted service, available for users of federal payment cards, including DirectExpress and GSA SmartPay cards.” DirectExpress is a MasterCard branded product.

The announcement didn’t set a timetable for Apple Pay support.

Apple Pay will also become available for many transactions with the federal government, such as at national parks, starting in September, Apple CEO Tim Cook said on Friday.

The payment card accounts that will gain Apple Pay capability are the same categories of cards that President Barack Obama announced last October would be switched to EMV chip-and-PIN cards as part of his BuySecure Initiative. That includes between 5 million and 6 million prepaid debit cards issued by Comerica Bank that are used for issuing government benefit payments, including Social Security and veterans benefits, to recipients who don’t get direct deposits.

Another 3 million cards issued to federal government employees through the General Services Administration’s SmartPay program were also tagged for EMV upgrades in the October announcement, and are targeted to be supported as part of Apple Pay, as well. SmartPay cards, issued by U.S. Bank, are responsible for more than 87 million transactions worth $26.4 billion each year, according to the GSA.

The BuySecure Initiative also calls for the adoption of technology at post offices and government agencies and national parks so that they can accept EMV-enabled cards.

U.S. Bank already officially supports Apple Pay for its payment cards, but Comerica hasn’t yet announced that it will be offering Apple’s payment service. About 60 financial institutions have gone live with Apple Pay support, and more than 500 others have signed up to support it.

Along with Apple Pay itself, the White House statement laid out support for Visa’s initiative to widen its use of tokenization by the end of Q1 2015, as well as password-replacement technologies from American Express and MasterCard. Apple Pay already uses tokenization, as well as fingerprint-based TouchID authentication instead of passwords or PINs for payments.

SmartPay cards, according to the website are fleet cards, purchasing cards for construction and supplies and travel cards for travel and hospitality related services and used with approved suppliers. It’s unknown how much volume will be driven by Apple Pay. Apple Pay can only be used on iPhone 6’s – and government issued phones are not (at least now) Apple products and SmartPay cards cannot be used on government workers’ personal phones. DirectExpress benefits are directed to pensioners and vets. Roughly 11 percent of smartphone users age 65 and older are iPhone users and veterans, who depending on their age and income, may, today, skew disproportionately to Android.