Apple Enters Payments: Is Apple Pay the Answer for Mobile Payments?

by Zilvinas Bareisis, October 9, 2014
Global

Abstract

Apple Pay has a good chance to be successful, but it’s not going to happen overnight. In the US, the keys to its success lie with the merchants, and Apple needs to develop a much stronger merchant proposition, particularly for in-store payments. Internationally, Apple may find it harder to negotiate with the issuers and will have to contend with the dominance of Android.

On September 9, 2014, Apple announced Apple Pay along with iPhone 6 and Apple Watch. Apple Pay is first available in the US, with international launch expected later. The announcement sparked a frenzy of discussions, in both private boardrooms and public forums, on what Apple Pay means for the industry.

The Celent report Apple Enters Payments: Is Apple Pay the Answer tor Mobile Payments? is our take on what Apple Pay is and how it works. The report uses Celent’s payments product evaluation framework to assess the likely success of Apple Pay and what it means for the industry.

“Apple Pay raises the bar for mobile payments in terms of consumer experience and security,” says Zilvinas Bareisis, a senior analyst with Celent’s Banking practice and author of the report. “However, given limited consumer reach and expected reluctance from the US merchants to switch on contactless acceptance in their stores, Apple Pay’s success is not guaranteed. Time will tell if Apple can ignite mobile payments and succeed where so many others failed, but this development is certainly impossible to ignore.”

This report contains 13 figures and one table. It concludes with recommendations for issuers and processors, and discusses Apple Pay’s impact on a number of important industry issues.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
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Table of Contents

Executive Summary

1

Introduction

3

Apple Pay: What It Is and How It Works

4

 

Introducing Apple Pay

4

 

How Apple Pay Works: Getting Started

5

 

How Apple Pay Works: Transactions

8

 

How Apple Pay Works: Commercial and Other Points

10

Evaluating Apple Pay

12

 

Celent’s Framework for Evaluating a New Payments Solution

12

 

Consumer Perspective

13

 

Merchant Perspective

15

 

Solution Providers’ Perspective

16

 

International Perspective

20

Apple Pay Impact on Other Players

21

Summary and Recommendations

23

Concluding Thoughts

25

Leveraging Celent’s Expertise

26

 

Support for Financial Institutions

26

 

Support for Vendors

26

Related Celent Research

27

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