Apple Pay is coming to the UK, but it is not necessarily good news for retailers
At their developer conference this week Apple announced that they would be launching Apple Pay in the UK in July, enabling millions of Apple device owners to use the tech giant’s mobile payments service. So far, MasterCard, Visa, eight UK banks and other payment players like First Data have announced support for Apple Pay.
It is well understood that in Apple Pay, consumers can pay contactlessly by holding their iPhone near a contactless terminal and authenticating with Touch ID. For purchases within an app, consumers touch to pay and authenticate with their fingerprint or passcode without having to enter their card number or leave the app.
What does it mean for cashflows, evidence from the USA shows that Apple Pay does increase usage, viz:
- nearly half (46%) of iPhone 6 owners have successfully used Apple Pay.
- researchers have recorded a very high rate of repeat usage: 63% of people have said that they use Apple Pay at least weekly
- Apple Pay is the first service to garner double-digit numbers of users. As the upgrade cycle gives more consumers access to Apple Pay
But overall usage only increased minimally.
Not ony this, the Association of Finance Professionals and others report that some retailers don’t like Apple Pay because:
- the tokenization in Apple Pay (using one-time account numbers) stops retailers recognising the customer and engaging with their customers (but this anonymity is exactly what Apple promote to their iPhone users)
- it could canabalise retailer’s loyalty programmes (Although recent announced new features in IOS9 could prevent this)
- it could increase costs as the majority of Apple Pay users are linking their credit card to the Apple Pay system rather than their debit card (Chase Bank found that 69% of Apple Pay users were credit card based.)
- Apple define the routing of the transaction and don’t allow for the Durbin-sanctioned least-cost routing between two debit networks which cuts costs
- only consumers with the latest iPhone 6 and Apple Watch can use Apple Pay .
CTMfile take: The key argument for adopting Apple Pay is the improved security from the tokenization, one-time account number transactions, biometric authentication and Apple’s closed environment, but there are immediate issues and not all retailers will or need to accept Apple Pay. Nevertheless, in the longer term, consumers will expect to make payments direct through the mobile phone using biometric authentication.
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