Buried under an avalanche of tech specs, shiny product photos and evangelical videos, you might have missed when Tim Cook announced that Apple was entering the mobile payment market with Apple Pay. Will Apple’s first foray into this crowded space give it the boost it needs to make NFC, Near Field Communication, ubiquitous? The first signs are not so positive.
What is Apple Pay?
It’s a service that:
- is available with an Apple Watch or iPhone 6 or 6+
- uses NFC to communicate wirelessly and securely
- uses SecureElement hardware to encrypt personal information, and
- does not share personal information with vendors
Shut Up and Take My Money
So far so good, but Android phones have had NFC antennas built in for years and it has not really taken off. Despite lots of promise and interesting applications NFC is still largely unknown among consumers. What makes Apple Pay different? Why does Apple think they will succeed where others have failed?
- Partnerships: they have partnered with Mastercard, Visa and American Express to offer the same protections as normal credit cards.
- Retail Partnerships: Apple Pay can be used 220,000 stores including McDonald’s, Nike stores, Disney and Whole Foods to name but a few.
- Privacy: Apple does not receive or store any information about your purchases. That information is between you, the bank and seller.
- Security: Apple Pay does not send your credit card number but creates a one-time token and if your Apple Pay is compromised you can cancel it without having to cancel your credit cards.
- Convenience: If you have an iTunes account then Apple already has your payment details, so you already trust them.
These are all very positive points and steps in the right direction. Unlike Google Wallet, Apple does not make money through advertising, so people do not have the same concerns about data privacy and targeted ads. The recent scandal with Jennifer Lawrence’s privacy, however, has left people concerned about Apple and security. But Google is not the only game in town, as we reported recently on the new Facebook “Buy” button and the Twitter ‘Buy” button. While these social payment solutions are a little different from Apple Pay in that they don’t offer NFC POS transactions, Apple Pay does allow for online transactions. Apple announced that they are teaming up with Uber, Groupon and Square to offer Apple Pay integration.
Consumer says No
With all of this speaking for the success of Apple Pay it is not surprising to see blog posts and articles predicting a triumphant return to form from Cupertino. However, while Apple, the iPhone and customers might be ready to ditch their wallets there are few potential hurdles for Apple to pass:
- While 220,000 stores sounds like a lot, Apple Pay can only be used in roughly 2.4 percent of the stores that accept credit cards.
- Stores will need upgrade their current hardware to accept NFC mobile payments.
- Around 44 percent of American consumers say they would never use a mobile payment system.
All About that POS
Is the time right for Apple to succeed with Apple Pay? Starbucks’ success with their mobile payment app – registering 5 million sales a week – gives some indication that young people and coffee lovers are ready to jump on the early adopter bandwagon. One of Apple’s biggest strengths is that they don’t need to make money from this. Unlike many of their competitors they can design the experience from a customer-first perspective as an added argument to use their products. However, no amount of early adopters and good intentions will help Apple if retailers don’t start upgrading the POS infrastructure.