Apple may be light years ahead of the market, but everyone is going to play catch-up in a hurry!
Apple Pay comes hot on the heels of the release of the iPhone 6 and the iPhone 6 Plus. But Apple Pay is way ahead of the competition and it’s likely to redefine the way we use our credit cards to pay for goods and services via our smartphones and tablets.
- Wall Street will be eyeing failure rates and adoption rates of the new technology.
- Apple Pay is compatible on iPhone 6/iPhone 6 Plus but not on new iPads for in-app purchases.
- Apple Pay is compatible with a limited number of machines with near-field comm.
- The majority of retailers, stores and restaurants are behind the 8 ball with this tech.
If you haven’t already heard about Apple Pay, you’re not the only one. Apple Inc (AAPL) is notorious for keeping hardware and software developments under wraps, and then surprising everyone with ground-breaking technology that either catches on like wildfire or tanks. Apple Pay is an innovation that is likely to become the benchmark for near-field wireless payments processing in the most secure way possible. On Monday, 20 October 2014 Apple Pay was launched, and it includes 500 banks, credit unions and financial institutions in its mix of compatible payments processing companies.
While Apple iPhones have a minority stake in the global smartphones market, this new payments system will be a game changer for its biggest competitor – Google Android. Google has failed to perfect its mobile payments solution, and the launch of Apple Pay may ironically send Google tech developers back to the drawing board to reconsider their failures, and bring Google Wallet up to standard. It should be borne in mind that Google attempted to revolutionise the e-Wallet concept as far back as 2011, and if Apple succeeds, the entire industry may benefit. Presently, companies like Walmart and Best Buy are not part of the Apple Pay system, but that too could change.
Part of the criticism that has been directed at Apple, vis-a-vis Apple Pay, is the stigma that is being attached to credit cards. Apple is trying to paint the picture that credit cards are inherently unsafe and that users are better off using Apple Pay rather than physical credit cards to pay their bills. Perhaps a more valid criticism is the old expression, ‘Don’t put all your eggs into one basket.’ People are loath to put too much faith into a single electronic device which carries their address book, access to their e-mail accounts, business meetings, personal and financial information. The battery life of high-tech smartphones and tablets is limited, bringing into question the wisdom of disregarding a conventional wallet in favor of a system like Apple Pay. The assumption is being made that people are going to move away from carrying cash and credit cards in their wallets – perhaps rejecting them completely – in favor of the iPhone 6 or the iPhone 6+ with its Apple Pay technology.
It’s possible that a backlash may occur against technology, especially when things start to go on the fritz or when glitches arise. Customers are also concerned about theft, loss or misplacement of their iPhones and what that means for their credit cards and other personal information. Regardless of the shortcomings that may or may not pan out, Wall Street is really interested in this new technology. If the rollout goes well, this bodes well for Apple stock and it will create lots of frenzied activity from Apple’s competitor – Google Android. There’s been a lot of buzz generated by Apple’s innovations, particularly when new software or hardware appears to create a demand that never existed before its arrival. For its part, Apple hopes that Apple Pay will be the answer to the question that was never asked.
Who is on board with Apple Pay?
Presently, there are only a few companies signed up for Apple Pay payments processing. These include Walgreens, Whole Foods and Macdonald’s. As alluded to earlier, Best Buy and Walmart are not on board with this yet. To use this technology, iPhone owners will have to enter their credit card information one time, and then use a thumbprint to process payments with near-field communications. When it comes to banks and financial institutions, Apple has snapped up most of them, including Amex, Visa and MasterCard. Presently, debit cards, proprietary credit cards and corporate credit cards are not accepted on the Apple Pay system.
These are perhaps the biggest problems with the system. Many big retail stores that offer customers proprietary credit cards that are linked to rewards programs offer greater benefits to consumers than using other credit cards on Apple Pay to purchase products from those same stores. Payment terminals at retailers need to be upgraded to accept near-field communication payments from iPhones. Clearly the system is in need of upgrading, so the rollout of Apple Pay will take some time to achieve the proverbial economies of scale.
Security Concerns with Apple Pay
Security is always high on Apple’s list of priorities. Apple Pay will follow in the same mould, and provide customers the most secure payments processing technology possible. This is especially important to American customers who were hit with a massive security breach when many of Target’s credit cards were hacked in 2013. What’s different about Apple’s technology is that every time a transaction is processed, it will have a unique code that is a once off code per transaction. Even if the information gets intercepted, it is useless to the hacker. The information is sent directly to the retailer’s network. If you lose your phone or tablet, you can suspend Apple Pay with Find My iPhone.
Apple pay works in unison with a user’s iTunes account as well as all the cards that are added to your Passbook app. Users have the option to take pics of their credit cards or add in the numbers and security codes. The NFC antenna in the latest iPhone will automatically awaken the phone to activate the payment option. Checking out is completed with a Touch ID thumbprint. There is no need to pull out credit cards, ID, social security or other documents to make payments – it’s all done via a Device Account Number (a dynamic security code) and no credit card numbers are shared between Apple and merchants.
Apple Pay and Google Wallet Scramble to Cash in on Mobile Payments
Apple’s annual revenues are immense, but Apple Pay will still contribute towards boosting the company’s income streams over time. By 2015 the estimated revenue generated from this technology is expected to be in the region of $118 million. By 2016 that figure may well hit $300 million. This pales in comparison to the company’s overall income, which was reported at $180 billion for the year ending September 27, 2014. The more important issues for Apple relates to how this will impact on the demand for Google Android, and how it will impact on the demand for Apple iPhones. So far, Google Wallet has failed miserably. Industry analysts are expecting the growth curve for Apple Pay to be equally slow. Apple can learn many valuable lessons from Google and its failed attempts to implement Near Field Communication technology with retailers around the world.
Indeed, many of the challenges faced by Google will be faced by Apple too. First of all, the software needs to be user-friendly, secure, intuitive and easily accessible. The goal of course is mass merchant adoption, with the concomitant supply of NFC devices. Customers don’t want to have to jump through hoops to use their smartphones to make payments – they want secure instant payments. Like Apple Inc, Google is innovating on multiple fronts. Clearly the Google Wallet component needs tremendous work, and it is not the sole focus of the Android giant. For its part, Google is not averse to partnering up with key players. It’s clear that the big credit card companies are eager to have cross platform partnerships with both Google and Apple. Now, both Google and Apple need to find retailers that are equally flexible to partner up with them too. Watch this space…