Wouldn’t it be great if we could make all our transactions with the touch of a button? How about throwing away those credit and other bank cards and make payments without having to use cash and/or cards?
Yes making payments is very easy with credit cards and other bank cards but it is also true that approximately 43% of Americans have experience some form of credit card theft, and that doesn’t even include persons in other parts of the world. The world therefore looks for a new and safe way of conducting business; and that is what Apple Pay by Apple inc promises consumers, banks and business owners/ retailers. Apple, a leader in any category the company sets it’s eyes on, is the role again with another innovative product.
What Is Apple Pay?
Apple Pay is basically a wallet system that doesn’t hold stored value itself, but taps into existing payment infrastructure operated by banks. It uses near-field communication (NFC) to facilitate transactions at payment terminals and digital authorization in online transactions.
Apple Pay therefore when roll out fully will be a dream to many users who likes the ease of making payments and cannot really bother with carry bank cards and/or cash around. Apple Pay promises to be an easy to use method of making mobile payments right from your IPhone 6 or Apple Watch devices for consumers.
However, consumers will not be the only one who will come in contact with Apple Pay as business owners, and other financial service providers will either be positively or negatively affected by Apple’s latest software development.
Reaction to Apple Pay
One of the big takeaway from Apple’s latest product offering is that Apple has created a ground breaking technology that is able to go into markets that big leagues such as Amazon and EBay where not able to. This is as a result of NFC or Near Field Communication technology that is available in Apple IPhone 6 and iPhone 6 Plus, which will play a very big role in Apple Pay success, or failure. According to Business Insider (http://buinessinsider.com), due to the large number of NFC compatible phones, consumers will now find NFC capable registers at key large retailers.
However, NFC payments are not anything new as it have existed in the Android ecosystem for several years. The same is true of mobile wallets that store user payment credentials, via PayPal, Venmo, and previously, Google Wallet and Lemon. Perhaps the main reason why NFC hasn’t took off as expected is because of its inconvenience and cost of implementation at the point of sale, and perhaps perceived as less secure by the customer. So why is everyone so excited about Apple Pay? Because it is from Apple of course. Apple for a very long time has a way of making something that had already been done seems like something new; a way to turn a failure into a success. When Apple speaks, people sit up and listen.
Despite of the perceive benefits to be derive from the use of Apple Pay, According to http://www.businessinsider.com, not everyone will be too happy to share their consumers data with Apple while some other retailers own mobile payment strategies may conflict with Apple Pay. You see therefore why many retailers will be a bit resistant with the use of Apple Pay, especially amongst the big guys (large retailers). For example some large retailers are bound to an exclusivity agreement which prevents them from accepting other parties’ mobile wallets.
Similarly, big companies like Pizza Hut, according to Mobile Marketing Watch, is very pessimist about the success of Apple Pay for several reasons, amongst them are the fact that there’s no ecommerce option and Android users (of whom there are many) are naturally excluded. Apple will therefore have to work hard in convincing the American public who has no problem using bank cards that Apple Pay is the way to go. However, according to Mobile Commerce Daily reports, Brett Miller, vice president of ecommerce at Calvin Klein “expects Apple Pay will help drive ecommerce conversions by streamlining the payment process and influence the mobile payments landscape”. He further said that Apple Pay will be a game changer as Apple Pay will be the tipping point in the whole process mainly because of ITunes over 500 million iTunes account holders, and the 22,000 retailers who have already signed on to Apple Pay. Furthermore Americans already find it easy to go on iTunes and buy something.
Another big challenge Apple Pay will face is that of infrastructure, and retailers are not very fast in introducing new payment terminals. Apple however, is trying very hard to get retailers to jump on their payment processor train as according to Time, the over 220,000 stores in the US only that has signed on with Apple amount to little over 2.4% of the roughly 7 to 9 million merchants in the U.S. that accept credit cards, Apple therefore got their work cut out for them. Apple has already integrated with Macy’s, McDonald’s, Walgreens, Staples, Disney, and several other major retailers, not to mention its back-end partnerships with Visa, MasterCard, AMEX, and the six largest issuing banks that is said to collectively represent 83 percent of all credit card volume.
If Apple Pay leads consumers to start using credit cards and ditch debit cards, Apple will not make many friends amongst many large merchants. This is because many merchants have been trying for years to lower processing fees by driving more debit card transactions; therefore an Apple led drive to increase the use of credit cards through Apple Pay will swing the pendulum in the other direction.
Apple Pay will however face very little resistance or trouble with e-commerce companies. Apple will therefore have more success in the online commerce world than in the real world dealing with retailers and other merchants. This is mainly because its app merchant ecosystem is huge and largely trapped in the AppStore. Apple charges around 30% of an app’s cost, so many retailers offer the app for free and charge for goods sold via the app. Now Apple can gain a slice of the payment processing fee.
Apple Pay announcement is not welcome news for many modern payment technology companies, but it is plain to see that the big winners that will greatly benefit from Apple Pay, other than Apple, is the banks who had no problem signing on, especially for companies like Visa, MasterCard, and AMEX, and others will soon follow.
It is true, banks may lose a small slice of their fees, but they will benefit from reduced fraud costs, and not to mention the large increase in numbers of transactions. It is therefore a win-win scenario for banks and credit card companies. Moreover American banks who have been under much pressure to adopt or find new measures that will offer better security to consumers, will experience more security without having to invest in smartcard or any system upgrades. Who will mostly feel the pressure will be payment intermediaries who will be under more pressure to innovate in mobile and software, but this we think will be a short term issue.
What puts Apple Pay above other mobile payments provider is its ease of use and security, which Apple will be using to their advantage in convincing the populace and retailers to use them over other mobile payment providers and traditional methods. As reported in Panda Daily, due to recent memories of the security of Apple’s cloud, many consumers may be more skeptical about trusting Apple Pay with their payment credentials. This however should not be an issue for concerns as over 800 million consumers have already given Apple this information through iTunes payment data, and it will be as easy as a single click to integrate this existing data into Apple Pay. Moreover, Apple Pay security and privacy technologies are at this point second to none. Apple’s TouchID biometric sensor – which is widely considered best-in-class – gives it the ability to secure mobile devices and authenticate payees better than its competitors, giving consumers a piece of mind. To add to this Apple has added Secure Element to its iPhone 6 line that takes security to another level. It is true that like NFC technology, Secure Element has been around for a while, most notably as part of the old Google Wallet platform, however, combined with Apple’s hardware advancements and business development muscle, could finally change the way consumer payment security is handled. Surely when Apple was thinking about Apple Pay and iPhone 6 line they were thinking about security if they were going to sell their product to an already skeptical public.
To be more convincing, Apple does not share user payment credentials like credit card number, expiration date, security code, and billing address with merchants. To make payments more secure and consumer privacy of paramount importance the company has instead chosen to store consumer details in encrypted form within the Secure Element and at the time of payment converts those details into what it calls a device-specific one-time payment number and a dynamic security code, often called a “token,” that is passed to the merchant. Merchants therefore will never have access to the payee’s credit card information and thus cannot lose it should their security systems be compromised. We all heard about many companies security breach and its effect on millions of consumers whose credentials where compromise. If users iPhone have been stolen or lost they can remotely through the Find My IPhone app or website suspend all their payments credentials, therefore there will be no need for consumers to cancel their credit cards.
One would think that for a system that promises maximum security, which is one of the main reason why many banks and credit card companies were quick to jump on the Apple Pay train as it will minimize fraud and theft, that using Apple Pay would be complicated. This is far from the truth. To make payments all consumers have to do is hold up their phones to a reader (NFC in phone) and holding a finger over TouchID. This is much more easy and secure over credit card purchases. Security therefore will not be a major barrier in the medium-term. However, for Apple Pay to work securely and security not compromise all systems have to work together flawlessly to keep any attacks at bay.
Apple Pay and App Developers
Banks, consumers and retailers are not the only one that will be greatly impacted by Apple Pay. App developers for sure will want to ensure that their apps are compatible with Apple Pay if they don’t want to leave behind. App developers and even merchants for example Amazon and other sellers will therefore want to ensure that Apple Pay is included as a payment processor in their apps and online e-commerce store(s). Apple Pay will greatly impact conversion rate, therefore app developers should rush to see how they can include Apple Pay in some fashion in their apps. Apple will no doubt try to get app developers on board as they will earn a slice of all transactions.
Apple Pay- the big game changer in payment transactions
For decades many companies have attempted to replace physical wallets and payment cards but with not much success. This may be because driving widespread adaptation among consumers and merchants have never been an easy task. However, we are confident that Apple will be able to pull this off, not without a little resistance has we have showed above, but one thing we have learn about Apple is that they have a niche for making people listen and for making what has already been tried and fail a major success. Apple products are very elegant with software design that grabs people’s attention and make competitors run to the drawing board, Apple Pay will be no less . Even if consumers found better products than Apple products there is just something about Apple that makes consumers buy into whatever they are offering. For now, competitors like PayPal’s position in the payments hierarchy appears safe however Square and Stripe seem more vulnerable. For example Square has already tried and failed to drive adoption for its own mobile wallet app, pulling Square Wallet from the app store earlier this year.
Even if many large and small retailers, e-commerce and other merchants do not jump on the Apple Pay bandwagon, Apple still have a sea of user base to tap into that will still make them billions or dollars. After all with over a billion iOS users and 800 million iTunes account holders, Apple has an enormous installed base, many of which will eventually upgrade to NFC and Apple Pay enabled devices. Setting up Apple Pay at the consumer side is very quick and easy, just take a photo of your credit card and its details are stored in the Passbook wallet. Though Apple Pay will be largely accepted by many consumers and merchants, Top Apps Reviews believe that it will not reap the level of success that a system like this could reach as it limits the use of other devices such as mobile phones using Android software. Moreover, due to the fact that individuals credentials will be stored on their iPhone 6 device, the iPhone 6 will now become a target for criminals despite of its security features. Criminals are not all fools and will find ways to get away with their crimes, even using the iPhone 6 user at gun point to complete various transactions. It is therefore never a wise thing to have several accounts tied to one thing like it will with IPhone 6. No doubt Apple Pay will be security heaven but at the same time a big security treat.
Impact of Apple Pay
Despite of this, Apple Pay, we expect will have tremendous impact on commerce in the near to distant future, it is indeed a game changer. This is because Apple Pay will take users security, identity, user’s wallet information and putting all these data into something anyone can do and use quickly and with great ease. Very quickly Apple is pose to become the biggest juggernaut in payments and commerce that we’ve seen.
The big questions now are, what impact will Apple Pay have another payment competitors like Paypal amongst others? Will Apple Pay totally replace the use of credit cards within stores and online transactions in the near to distance future? What next revolutionary product will Apple dream of next? Apple has never enter a market before and not change and dominate it, will Apple do what others like Paypal, Google and others have tried before and failed? Will Apple extend the system beyond the shores of US? Will others follow in Apple’s shoes? What impact will Apple Pay have on merchants in terms of costs and risks of fraud and theft? NFC and mobile wallets in general have struggled to gain acceptance and adoption in the U.S, will the highly publicized Apple Pay be the catalyst to drive retailers and consumers to embrace NFC payments? Your guesses to these questions and more are good as mine but the world is watching to see what will happen with keen interest. Please share your thoughts with us by leaving a comment below or on our Social Media Page. Also please check out our other articles and reviews and please subscribe for updates on Apple Pay and other articles.
See also: Apple Pay- The New Payment Method by Apple that will revolutionize how we do business
Also: Apple Watch— Get personal with Apple Watch from Apple
and: IPhone 6 Review- IPhone just got bigger and better with IPhone 6