Apple Pay rolls out in the UK today, and retailers across the land will no doubt be cursing their decision to implement the mobile payment system. Sweaty customers will fumble around with their iPhones trying in vain to register their payments. Queues will form. Customers will rage. The store next door which isn’t using Apple Pay will fill up with people desperate to buy their goods in a madness-free zone.
But let’s not get all pessimistic about Apple Pay. After all, this is a service which Apple CEO Tim Cook described as “the first and only mobile payment system that’s easy, private, and secure.”
For the benefit of the uninitiated, Apple Pay is a platform that lets customers pay for goods and services using their iPhone 6, Apple Watch, or iPad. They need to hold their Apple device next to a contactless point of sale terminal and the transaction is made securely, charging the debit or credit card that’s attached to their iTunes account.
Since its US launch in October 2014, Apple Pay has had its fair share of critics. There are plenty around who have doubted– and still doubt– the value of the mobile payments system and others like it. So perhaps it’s time to debunk a few misconceptions about Apple Pay and stamp out some of the cynicism…
It’s just a fad
Although it’s difficult to properly quantify the popularity of Apple Pay, there are certainly signs that both customers and businesses are warming to the platform.
At the back-end of last year, things weren’t looking good for Apple Pay. It launched in the US in October 2014, and by December, InfoScout was reporting that only 9% of iPhone 6 users had actually used the feature on their phone. Many commentators, such as Forbes writer, Gene Marks, were doubting the potential of Apple Pay, pointing to the reluctance of customers to ditch their credit cards and the lack of apparent benefits to the retailer.
However, the picture today is looking brighter for Apple Pay. At its Spring Forward event in March, Apple announced that the mobile payment service was now being supported by 2,500 banks and at almost 700,000 locations. The growing number of stores and restaurants that have adopted Apple Pay include McDonalds, Bloomingdales, Subway, Nike, Sephora, and Walgreens.
Although there’s still some traction to be gained, GigaOm reports that 2016 will be the year in which mobile payments finally take off, spurred by this growth in uptake of Apple Pay. And with Google aggressively pushing Android Pay (formerly Google Wallet) and Samsung doing the same with its Samsung Pay offering, retailers are (and should be) increasingly taking notice of mobile payments.
“This question is somewhat similar to the question of “Why take credit cards?” when they were just coming out. Now, we live in a sea of plastic,” says David Bozin, VP of Business Development at Bindo, a POS application that integrates with Apple Pay. “In hindsight, things become crystal clear. Now, let’s apply that to the new medium of payment: NFC.”
“It is the merchant’s responsibility to cater to their consumers. The method of payment is one of the things that they have to take into consideration, especially as demand for such a payment medium will only increase,” he says.
“In this case, Apple Pay is one of the more prolific NFC payments, which many major retailers are supporting. This new medium, just as with plastic, will increase in popularity, especially given that the one thing we always have with us are our mobile devices, many of which are already capable of NFC payments.”
It doesn’t benefit the retailer
It’s been argued that there’s little incentive for businesses, especially smaller merchants, to adopt Apple Pay. After all, the transaction fees aren’t any less than they are for credit card transactions (around 2-3%), and the cost of buying contactless terminals, upgrading POS systems, and training staff could be seen as counter-productive for businesses with smaller margins than the big retail and hospitality firms.
But all this doesn’t mean there are zero benefits to implementing Apple Pay. “The major thing that a merchant will notice is delight from their customers,” says David Bozin. “It is an awesome feeling to know you have the latest tech, and the tech-savvy consumer will appreciate it. It is part of the shopping experience, and thus, will give the customer one more reason to come back and buy from you.”
Aside from giving the customer an enjoyable, pain-free payment experience, Apple Pay (at least once the technology is running smoothly) should lead to shorter queues in stores. This, in turn, will lead to more sales, allowing businesses to offset those initial startup costs.
It’s possible for retailers to implement reward programs into Apple Pay too. When iOS 9 is released this fall, the Apple Passbook app will become Wallet, which will allow additional options at checkout, including Apple Pay support for rewards and store-issued credit and debit cards.
If you’re an online retailer, or if you sell goods through an app, you’ll be able to take advantage of Apple Pay’s ‘card not present’ fees, which represents a lower transaction charge than what you get with standard financial institutions.
Another advantage of Apple Pay is its scope for integration with accounting applications. In GetApp’s Q2 GetRank research on cloud accounting software trends, analyst Sholto Macpherson expressed that: “Payment systems are starting to integrate more deeply with accounting software platforms. Users will soon be able to make payments in Apple Pay, for example, and see the transaction automatically appear in their accounting programs.”
It’s not secure
If you’re worried that Apple Pay is less secure than traditional payment methods: don’t be. In fact, according to Business Insider, Apple Pay is leading the way in security protocols, stating that the system “has security measures above and beyond the rest”.
Every transaction that goes through Apple Pay requires the customer to use Touch ID fingerprint recognition on their iPhone or iPad to authenticate the purchase. This significantly reduces the possibility of someone being able to make a fraudulent transaction.
Other security measures include the use of encryption and tokenization to protect sensitive data and reduce its potential transmission, as well as device authentication, whereby the Apple Pay system knows that a transaction is coming from an authorized device.
This chart from BI Intelligence shows how the security measures within an Apple Pay transaction come into play:
It’s too complicated to implement
As I mentioned earlier, one of the biggest turn-offs for retailers is the initial setup cost of Apple Pay. In order to accept Apple Pay in a store, you need a contactless payment-supported POS terminal and to liaise with your payment provider to tell them you’d like to accept Apple Pay.
But by integrating Apple Pay with your existing POS software there are plenty of benefits to be gained.
“The major thing that a merchant has to take into consideration is hardware-software compatibility,” said Bindo’s David Bozin. “There are hardware requirements to take NFC chips, and the software has to be directly integrated into the Apple Pay platform.”
“Nonetheless, assuming that every platform out there has AP integration and can take NFC payments, then the true value lies in the proprietary software. In other words, apart from taking Apple Pay, what else can the merchant do? Can they manage the entirety of their operations? For most, the answer is no,” he said.
David continued: ““With Bindo, the merchant gets much more than Apple Pay and more general NFC capabilities. They get a platform that helps runs their business, from supplier management, inventory ordering and management, customer tracking, e-commerce integrations, to many other bespoke functionalities that are made to fit each merchant in the way that they prefer to run their business.”
So, it’s foolproof then?
Wrong again. Apple Pay and similar mobile payment platforms have the potential to make your customers much happier with their experience and therefore more likely to come back to your store. However, you’ve probably heard anecdotes from people who have used the service and got into difficulties.
A recent survey by Phoenix Marketing International said that two out of three people who used Apple Pay ran into problems at checkout. Issues included “terminals not working or taking too long to make a transaction, inaccurate posting of transactions, and the inability of cashiers to help buyers who need assistance.”
Until these teething problems subside, there may be a reluctance among customers to use Apple Pay for fear of being “that guy” who holds up the queue, frantically swiping his iPhone at the terminal.
Customer and merchant skepticism towards Apple Pay is natural though, just as it was when credit cards came into being back in the 1950s. And looked what happened there…
Have you used Apple Pay yet either as a customer or a retailer? Do you think mobile payment systems will kill credit cards eventually? We’d love to hear your thoughts in the comments below.