We set out to make the best watch in the world. One that is precise. Its synchronized with the universal time standard and it is accurate within plus or minus 50 milliseconds. It is incredibly customizable so you can find one that reflects your personal style and taste. Besides the watch, apple showed off two bigscreen iphones. Not just bigger, but also thinner. It also unveiled a new payment system, apple pay. Cory johnson and i spoke with the Senior Research analyst jean muenster and also om malik. I started by asking him if he would wear this new watch. No. This is the first apple product where im not rushing out to buy it. Why not . It doesnt feel like a Company Product to me. I dont think it has the emotional connection with me in terms of as a watch. I am an avid watch wearer. I have a lot of watches. I have a lot of analog watches. I spend a lot of time thinking about watches and how they relate to me as a human being. This watch was not speaking to me. It felt a little bit too early and too premature. You and i talked a lot about the challenge of wearables because what we wear is an expression of who we are and what we like. Gene, how do you respond to that . Om saying flat out, im not going to wear this thing . This is a critical starting point for wearables and apple. Over time, i think opportunity will present itself. There could be a billion watches sold every year. This is a huge market. My response would be that i think this is somewhere in 2015 will be the year it starts to take shape. As developers build compelling apps answer like the no will turn to yes. Is this a market that can get bigger . If youre not going to wear it now, will you wear it later . I think what i am saying as a watch and what they showed off today, it doesnt have anything of which i want to wear right now. A year from now or 18 months from now, it might be entirely different. I might change my mind at that point. This is a much more personal expression purchase. With a watch or a bracelet, you kind of have to, you know, it has to appeal to your inner self. Right now, it doesnt. That is what im trying to say. In 2016, 2017, we dont know. Cory, how about you . You are as gizmo and gadgeted out. As much as anybody can be. I think you tried every single smart band that you can possibly try. Are you going to buy one . Well, i think om is a very stylistic guy. That is a real challenge for the company. It is making things and deciding i want to do this thing with this device of which most people wont like. There is an elite sort of cost a lot of apple products that has given them a certain demographic certainly because of what it costs for this device. That has never been the approach of apple. They sort of said they want to be for everyone as long as everyone has a lot of breadth. With the watch, they are facing a different business. That is interesting aspect. Yes, it is early days. It is not available yet and we are debating whether we want to buy the thing. I was tweeting out pictures and sending out videos of the watch. I have done a lot of interesting reactions from people. It is very personal. It talks to us on how difficult this market will be for these guys. It is a pretty cool device. It is new in so many ways come at the least of which have got this watch os that will take developers time to get their head under. Maybe the next phase seems to be. It seems developers can do very new things with this, especially with all of the sensors. The possibilities are remarkable. As a fashion statement, om, is this going to be cool . I know you wont wear it, but google glass is if you wear it, youre like a social pariah. There is a name for it. Youre a glasshole. Is it going to be cool or uncool . You would not be uncool if you wear it. Youre saying it has got something. Look. It is an apple product. It has all the hallmarks of a classic apple product. It is well made and beautiful. The os is very smooth. The Technology Inside it is pretty well crafted. Again, it is not it is not a slamdunk for them. The iphone and ipad were game changers. I dont feel this is a game changer just at. Gene, how optimistic are you about this being a game changer . How much will it add to apples bottom line . I think in 2015, it will be modest. A couple percent to the street revenue. I think in 2016 is the wildcard in terms of what developers do and how the watch evolves. I think it is good for investors to realize that wearables is a category for the future. It is a critical starting point and it will take time for the value of this to evolve. I think it will happen. Still ahead, apple may have created apple pay for the new iphone but stripe is one of the Payment Systems helping to power these transactions. Well speak to their c. E. O. About their partnership with apple next on the best of bloomberg west. Welcome back to the best of bloomberg west. Im emily chang. Perhaps the most important product apple introduced was not a smart watch or an iphone but apple pay which c. E. O. Tim cook says will forever change the way we buy. It will store credit card information and allow users to pay for items holding a phone or the watch next to a reader. Apple has teamed up with tens of thousands of retailers in the United States to accept the mobile wallet and because over the partnership with the payment startup stripe, apple pay can help Small App Developers to enable the payment. I asked what stripes role in apple pay is. With apple pay, you need to work with a payment platform. Something that enables you to charge a credit card. Stripe is doing this with a ton of these successful apps being developed. Apple approached with us this new product they were developing. We have worked together over the past few months to figure out how to make it really easy for developers to take advantage of that. We will be working with these developers over the coming weeks , ensuring their apps are ready to take advantage of it. As soon as it launches. Are you handling all of the transaction or part of the transaction . Is this bypassing some of the deals with credit cards and banks . For the apps that are built on stripe, like lyft it is a really long list, and we will be handling all of their apple paid transactions. What do you think the chances are apple can replace the physical wallet . In some ways, the stripe opportunity is obvious. It took so long for it to happen. I think it is because it requires assembling so many different components will stop eat have the technology, the relationship with banks and financial partners. Its the same dynamic at play in mobile payments. The pos and retail stuff, whatever it will be, the devices, authentication the App Developers and everything else, right . I think that even though theres a battlefield of corpses present with apples antecedents, apple pay is a really good chance. I think this is the first product that has checked all of the boxes and has an excellent chance of success. Are pointofsale Terminals Holding out, i know credit card is not the best way to do it, but it is what we all know. There are two interesting trends will stop a lot of active sales are doing this this is quietly happening. Not just in the u. S. But around the world. The technology that makes apple pay possible, you can just wave your phone and wrist and pay. Exactly. The other interesting trend that will have some bearing is a lot of these transactions you think of as being offline artists are shifting into apps or offline. You think about order ahead or lyft, whatever the case might be, these are not supplanting ecommerce transactions. These are replacing instances like in a restaurant or in a taxi. The combination of these are moving into apps and in the fact that plenty of the pos systems are already enabled. I think its a fairly ready ecosystem. It seems like this is bad news for ebay which owns paypal. Paypal owns braintree which is your competitor. Braintree says they will support apple pay. How is that different from what you guys set up with apple . Apple is working with a small list of orders will stop the list is available on their website stop because we work with so many of the best or Fastest Growing apps or whatever, i dont know what ebay or braintrees plans might be, but theres an interesting strategic misalignment at a macro level between paypal and apple. Paypals strategy is fundamentally predicated on owning the consumer relationship. Paypal is a wallet system designed in the 90s. The fundamental idea behind the product is you should not need a wallet or need to go somewhere else. You should be able to authenticate with your fingerprint and the transaction is done. I think its going to be interesting to watch that play out. It is going to require that ebay and paypal could it take braintree and stripe out of the equation in any way . The design of apple pay today is carefully crafted so it enables apple to provide the User Experience they want or their users while still maintaining all of the other properties required any other parts of the ecosystem. These companies are selling in multiple countries, on different kinds of devices, in different channels. Not all just through phones, right . These Companies Need to have a commerce infrastructure they build on top of. It would be an enormous undertaking for apple to build all of that themselves. Its a more obvious strategy to work with the most successful commerce platforms, right . It would be an entirely different Business Model it would be akin to apple deciding we should build aws just because apps want to have a backend for the things that run the phone. Visa earlier said apple is not getting any cuts or what they take in the transaction. Is apple getting anything from what you get any transaction . We cannot comment on the economics, but there will be no charge for our developers for businesses going on strike. Apple pay will be a free product. And the apps that you power, they will still have our credit cards, right . Is that correct . The way it works is interesting. Neither the phone nor apple itself store the credit card number. Its a little arcane behindthescenes, but what happens is the credit card number is tokenized and a token is sent to the business. The token is a unique number. Exactly, specific to that device. It also requires a single use token obtained on a per transaction basis. But for the user, that doesnt change. You can store your payment details and request the ride as normal and the billing happens to your credit card as normal. The billing happens to your credit card as normal. All that is changing is substantially more secure. You seem to be on a roll, how does that work for you from a strategy perspective . Theres a lot of different kinds of partnerships. Its all oriented around the same pieces. We have talked about building economic infrastructure for the internet. About how there should be more transactions taking place. A major contributor to the limitations today or the fact that there are not more is that the infrastructure hasnt been there to enable them. Obviously, if it was easy to buy something billions of dollars of this would be happening. Its an obvious Business Model. Similarly, there are more Internet Users in china than the u. S. The fact they cannot buy from nonchinese sites is ludicrous. Its a collective failing on our part that we are not enabling these. Our strategy is to look at all the places were transactions should be happening and figuring out how we can facilitate it. People love portraying all of this stuff in a horse race and tell me. If you look, two thirds of Consumer Spending happens on the internet. So its not how it is apportioned on the pie chart, the interesting question is how we go from 2 to 10 to 20 . Thats where our strategy is. Patrick collison. You just heard patrick. Will apple pay really swipe business away from the service . Well hear from the c. E. O. Of braintree unit next. Welcome back to the best of bloomberg west. Im emily chang. Apple pay will launch from just a few weeks. Paypal will be supporting the device. However it is not on apples list of official partners. Does this spell problems for paypals future . We spoke with the c. E. O. Of braintree, also a paypal executive and asked why it was not an apples list of partners . You look at the last of partners that are not there. I think, you know, it is an interesting product. If you look at n. F. C. , though, it has been around for a decade and hasnt really gotten traction. There are a lot of Unanswered Questions on security, wholl be responsible for fraudulent transactions . Until those questions get answered, i think a lot of the merchants will be looking at it. For merchants that want to use us, we will support those transactions. We said well support these transactions because they are an open platform but until the questions about security, who holds the responsibility for fraud, i think youll see the players in the ecosystem waiting on walmart and best buy and others. The security inherent in that change the reluctance of some retailers that might be willing to accept the fraud risk because they know it is great, it is lesser because of i think that is a question that is still left to be answered. I think that the product is not out there yet so it is hard to speak to it. How well the biometric security is going to work. The fingerprint scanners are better than that they have been but they are not foolproof. There are a lot of those questions that are there. I think it is still open for the merchant who is going to be responsible for that fraud. It is not just about the finger print scanning. What happens when an account gets hijacked . These things do happen. When that happens, a lot of this rides on tokenization, a Virtual Credit card number. The onetime token number passes. Thats exactly right. However, that makes it so if one account gets hacked you dont have to reissue plastic cards. At the same time that often gets picked up after many transactions have happened. Who covers the fraud . That is a big unanswered question. There are a lot of questions about where apple pay really succeeds. We spoke yesterday with patrick collison. Take a listen to what he had to say. It is an interesting sort of strategic misalignment at the macro level between paypal and apple. Paypal is a wallet system designed in the 1990s. Apple pay is kind of the fundamental idea behind the product is that you shouldnt need another wallet. You shouldnt need to go somewhere else or to another website or Something Like that you use your fingerprint and the transaction is done. How do you respond to that . Google has Google Wallet but recently added paypal as a payment. One of the things people dont really appreciate is while paypal functions across the ecosystem, it functions from consumer to merchant and everything in between along with being the most trusted digital wallet, it is a Payment Method and platform. The button you push may be itune or google play but paypal is a payment within that. It supports a number of transactions when we are were not necessarily the wallet. We can say we accept other payments like bitcoin. We said were going to make it seamless for merchants to accept a number of wallets and payments. The world will have more of this. Including apple pay. You are compatible with apple pay, however apple is encouraging people to use the official partners. Right . Does that mean it is risky to develop for apple pay using braintree . Absolutely not. Apple said here are some providers we recommend but we work with any player that is out there. Somebody that has an s. D. K. For these things. We certainly do. Youre requesting the tokenized card number. There is not a lot more there than that. That tokenized card number we support those today. We support that standard. We have been a pioneer in tokenization for years. We have driven that. From that perspective were better positioned to handle it than perhaps anybody else in the industry. Braintree c. E. O. Bill ready. Tmobile is doubling down on wifi. Ill speak with john legere about the latest move on the best of bloomberg west. Youre watching the best of bloomberg west where we focus on innovation, technology and the future of business. Im emily chang. On the heels of apples new product announcements, tmobile made some headlines of its own. I went to their event in downtown San Francisco and sat down with john legere himself. I started by acting how many carriers can we expect . As many as we have aim points in the industry that need to be solved. One of the things we talked about in the session here was a trivia test to ask people when do you think was the biggest growth month in the history of tmobile. Everybody had a lot of guesses and the answer was august. The momentum of the company is great and we unleashed wifi which means every single device we sell from now on will be fully wifi enabled out of the box. Every wifi place will be a tmobile tower. Then we have the personal cell spot, which is our own capability in the home to give five bars of coverage wherever you want it and a relationship with go go that will give you texting and visual voicemail capabilities on planes. Youre basically giving everyone their own personal cell tower. Right. Hard to reach places you are probably one of those wealthy people with a gigantic home and down three stories you have this office. You get five bars worth of coverage. Is this an admission your network isnt that good and you need help . I love this. The first couple of questions i got generated by one of the three c. E. O. S of at t. They didnt talk to me. I came up with that all by myself. They said what are we going to do when tmobile announces this wifi stuff. Say they had to. My first answer to that is who cares . Who cares if i can give a customer a full five bars capability, who cares the reason i did it . 57 of wireless customers say theyve got some dead spots in their home or have a drop call. Not 57 of mine. 57 of all. Historically, that his wife tmobile fell to number four. Until you came along its because of the coverage will stop i know you have been working on it but how much has improved . We were here, we have zero bars of lte. We have 234 million pops. Weve got nationwide which nobody else does. Yesterday there were discussions about their capability and it was clear they are moving to next generation wifi calling and the only ones that have that is tmobile. 17 markets and wideband lte and moving. Its not so much where we were and where we are but where we are going. It is proven. We are the nations fastest four g lte. Everyone uses us but you and cory. I dont know what your problem