Apple Pay
Will it transform in-store and in-app payments in the UK?
Will it transform in-store &
in-app payments in the UK?
Apple Pay
Will it transform in-store and in-app payments in the UK?
OVERVIEW
Apple Pay is a payment method that works via NFC enabled Apple devices both in bricks and mortar stores and in apps. In stores it uses NFC payment points and Touch ID to make and authenticate payments, while in apps Touch ID is used to authenticate payments without having to enter any card details.
Apple Pay was launched in the US on the 20th of October, 2014 and in its rst 72 hours of availability signed
up more than 1 million credit cards. This move marks the tech giant s rst foray into the complicated world of mobile payments.
The idea of simpli ed in-store and in-app mobile payments is not a new one numerous companies including PayPal, Google, Square and Softcard have already staked their claim. However, for years retailers have been hesitant to embrace these technologies in-store for several reasons: security concerns, lack of a clear leader in mobile payments and customers being slow to adopt the technology. Furthermore, the valuable consumer data retailers collect from traditional POS and in-app systems would no longer be accessible. There has been no o cial announcement on when Apple Pay will be available in the UK, but it is expected to cross the Atlantic in 2015.
HOW DOES IT WORK?
Users can either select to use their existing iTunes credit card details or take a picture of their bank card to add it to their Passbook. They can then make payments in any compatible shop simply by holding an Apple Pay-enabled device up to a contactless payment point and scanning their nger print on the Touch D button. To pay for in-app purchases, users simply select Apple Pay on the payments page and scan their
nger print to authenticate the purchase.
Apple Pay
Will it transform in-store and in-app payments in the UK?
The issuing bank hides your card details behind an arbitrary code known as a token. This code, which is only used once, is used to authorise the payment. Every transaction will also come with a unique encoded passcode that will help determine whether a transaction is legitimate.
When a transaction is made Apple is not aware of what was bought, how much it cost or where it was purchased - that information passes directly to a user s bank. The participating shop does not get to see any payment details. Apple claims that this makes its service much more secure. In addition, if a user’s devices are lost or stolen there is the option to log on to iCloud and remove the payment details from the device.
WHAT ABOUT IN-APP TRANSACTIONS?
Apple Pay has the potential to transform the checkout journey of app-using customers. Until recently, without access to PayPal Express Checkout, purchasing goods or services on an app required guest or new users to go through the longwinded process of creating an account and registering a credit card. Using Apple Pay, customers will be able to simply tap their nger on the Touch D ngerprint sensor to complete a purchase for an item or service in an app. No more frustrating credit card detail screens. In terms of costs of using Apple Pay in your app, Apple has said that it will generate fees from banks, and not from merchants.
This whole process is based on this little piece of plastic, whether it’s a credit
or debit card. We’re totally reliant on the exposed numbers, and the outdated
and vulnerable magnetic interface, which by the way is ive decades old, and
the security codes which all of us know aren’t so secure.
- Tim Cook
Apple Pay
Will it transform in-store and in-app payments in the UK?
Eddy Cue, Apple’s Senior Vice President of Internet Software and Services, stated that he anticipates that the majority of early Apple Pay transactions will be through in-app purchases.
PSP INTEGRATION & IMPLEMENTATION
The use of Apple Pay in your app requires integration with your payment service provider (PSP). You can nd a list of payment providers who support Apple Pay with their SDKs on developer.apple.com/apple-pay/. Using one of these SDKs is highly recommended. Contact your payment provider for more information. The alternative is to provide your own server-side solution to receive payments from your app, decrypt payment tokens and interface with the payment provider. Handling credit and debit card payments can be complicated and unless you already have the expertise and systems in place, an SDK from a payment provider is the quickest and most reliable way to support Apple Pay in your app. From the information we have at present, once integration with your PSP occurs, implementation of Apple Pay in-app will be very simple.
HOW WOULD APPLE PAY AFFECT IN-STORE
TRANSACTIONS?
Apple Pay
Will it transform in-store and in-app payments in the UK?
Additionally, Apple Pay does not yet support loyalty cards, although there are rumours that this capability will be introduced very soon. At the heart of Apple Pay is Apple’s Passbook app, which is already compatible with dozens of retail apps with loyalty programmes. If Apple adds loyalty cards to its Apple Pay, it would give retailers another reason to get involved with Apple Pay. In addition to the bene t of increasing loyalty card use, Apple Pay loyalty card integration would also boost retailer app downloads.
HOW SUCCESSFUL IS IT IN THE US?
In the months since the company released Apple Pay, some major retailers have seen a wave of customers keen to pay with their iPhones.
More than 200,000 stores in the US accept Apple Pay, including heavyweights such as Macys, Staples, McDonalds, Subway, Toys R US, Walgreens and Whole Foods. On the banking and credit card side, Apple has won over Visa, Mastercard and American Express as well as the major US banks including Chase, Wells Fargo and Bank of America. Smaller banks and credit unions have yet to take part, though Apple claims that 500 more banks are scheduled for addition by early 2015.
The success of Apple Pay has had knock-on e ects for other mobile payment systems. According to ARS Technica, the number of Google Wallet users has doubled since Apple announced its own payment service. McDonald’s said the payment system accounted for 50% of its contactless transactions, while Whole Foods states that in the rst three weeks of Apple Pay availability, it had processed more than 150,000 Apple Pay transactions. Additionally, Walgreens said its tap-to-pay purchases had doubled since the launch of the service.
Apple Pay has a long way to go before it becomes a mainstream payment system. However, retailers’ numbers are the rst signs of widespread desire to move away from cash and cards.
“
Quite frankly, a lot of it has to do with the strength of the Apple brand and
“
how much merchants and customers love how easy the experience is. I’m not
saying it’s changing the landscape overnight. But this has never happened
with other mobile wallets.
Apple Pay
Will it transform in-store and in-app payments in the UK?
WILL IT WORK IN THE UK?
Visa has recently let slip that Apple Pay will launch in Europe in 2015 but a speci c date remains vague. When it does come to Europe we expect the UK will be one of the rst countries with access to the technology.
In the UK, the 40 million contactless NFC payment cards currently in use
already address the desire to make small in-store payments quickly. It may
well be the case that a mobile device manufacturer could take a big slice of the
NFC payment market, but gaining the trust of consumers to handle payments
securely will be a critical factor.
- David Blackwell, Telecoms Partner, Deloitte
Contactless payments are already up and running at places like Pret a Manger and on the London transport network, while EE has its own contactless payment app for NFC phones. Most large banks in the UK already issue contactless cards and more shops are starting to accept these payments. Visa Europe recently announced that contactless transactions have increased by 189% since May 2013, and more than 37.8 million contactless cards have been issued by banks in the UK alone.
However, on this side of the Atlantic there is an app in development similar to CurrentC. It goes by “Zapp” and promises to cut credit card companies out of transactions, saving retailers a small percentage on every transaction. It works by taking money straight out of customers’ debit card accounts through a bank’s mobile app and passing it instantly to the retailer. Zapp, which is expected to launch in
Apple Pay
Will it transform in-store and in-app payments in the UK?
As discussed earlier, many retailers have been hesitant to sign onto Apple Pay because they want to maintain control over customer data and because the user-focused service does not o er retailers su cient compelling bene ts. However, Apple s previous achievements in the consumer market could tip the scale towards widespread adoption. If Apple is putting its brand and reputation behind its new payment system, then customers are likely to fall in line. If consumers demand something in large enough numbers, companies must comply or risk falling pro ts.
CONCLUSION
t may not be easy for Apple to persuade millions of Britons to switch from a familiar and relatively simple in-store payment system to a new one. Convincing enough banks and retailers to sign on to new payment options to make a signi cant impact in another country is a gargantuan task. However, if anyone can do it, Apple can.
