Apple Enters Payments
- How easy will it be for Apple Pay to scale? The announcement talked about the issuers who agreed to participate as well as merchants that will be able to accept the service. But what kind of pre-existing relationships are required between Apple and issuers and merchants for the system to work? Clearly, issuers will need to be able to handle tokenised transactions, although that perhaps can be done by 3rd parties on their behalf. However, if they also need to negotiate the commercials, the enrolment process is likely to be more onerous. For merchants, my understanding is that any merchant capable of accepting contactless should be able to accept Apple Pay; however, online and in-app merchants would have to integrate Apple Pay into their checkout experience.
- How will the merchants react? On one hand, Apple and its market clout can set the standard for the industry providing a much needed direction to merchants where to invest. It also helps that the approach is aligned with EMV migration in the US and any new terminal that the merchants install should be capable of accepting Apple Pay transactions. However, other questions remain, such as:
- How will the consumers react? Clearly, the early demos show a very slick user experience, as we have grown to expect from Apple. However, without any additional bells and whistles, will it be enough to convince the consumers to reach for their mobile phones instead of their cards when paying? Sure, Apple’s approach is more secure than a mag stripe transaction, but will consumers understand the nuances of tokenisation or will they rather remember the nude pictures stolen from iCloud? In Europe, these arguments are even weaker – many consumers already enjoy the benefits of EMV and the speed and convenience of contactless (card) transactions.
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[…] First reason –I’m an Android user. Like it or not, Android and iOS don’t play nicely with each other, and the Apple Watch is a companion device for the iPhone. It’s definitely an intriguing device though, and I enjoyed learning more about how Apple plans to tackle the wearables space. The Apple Pay announcement was also extremely fascinating – my colleague Zil has prepared an excellent and informative review of Apple Pay. […]
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Zilvinas, thanks for the thoughtful analysis. While one hopes for a definitive "tipping point" you offer the right cautions that this will help but we are not there yet. One hopes that the biometric authentication capability will push things forward is not "overnight" than sooner rather than later. Thanks again.
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Nerijus, thank you for your comment. It is true that Apple at this stage is not offering anything beyond payments (i.e. no offers, loyalty integration, etc.), but I suspect it's only a matter of time. What Apple does offer of value though is the enhanced transaction security, particularly when compared with mag-stripe transactions in the US.
Celent's definition of mobile payments is any payment where a mobile device was used to either initiate or, in some cases, approve a payment transaction. So, we include both proximity and remote m-payments as mobile payments. On the other hand, we don't consider m-POS transactions as mobile payments - it is a card payment, and the mobile innovation is on the acceptance side.
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Russell, thank you, appreciate your comment.
Do we hear all the time - "just payment is not enough" - what Apple offer extra?
Mobile phone payments very different from mobile (remote) payments, this is obvious and Apple just mimic card (proximity) payment, nothing more. When we say mobile payment what we have in mind exactly? Device or process?