Apple Pay: Just another payments system?

It’s worth remembering that mobile payments in themselves aren’t new, and plenty of mobile payment systems existed before Apple Pay arrived on the scene. What is true, however, is that none of those existing systems saw real mainstream adoption.

That’s because it’s hard to get us to change our habits, especially when the current solutions - like good old-fashioned cash and cards - are working just fine.

To gain traction and be successful, any new payment method that is introduced has to be able to answer two fundamental questions from customers: is it more convenient than what I do now? And do I trust it?

Passing one of these questions is challenging enough. Passing both together has proved a major barrier to mainstream adoption.

The Apple Pay difference

Unlike other mobile payment alternatives, the big difference with Apple Pay so far has been that it has succeeded in providing strong answers to the dual question of both convenience and trust.

  • It delivers a simple, intuitive and compelling user experience.
  • It has seen broad adoption by banks, card issuers and merchants.
  • It provides robust security, deeply embedded into the hardware.

Apple also has the unique scale to do the right deals and to roll out the service quickly - as they have already shown with both the U.S. launch (October 2014) and the UK launch earlier this year. With end-to-end control of both the software and hardware, Apple has pedigree in payments (with over 800 million credit cards on file), and a highly engaged audience who routinely spend more via their devices than other mobile owners.

Using Apple Pay in-app

From a user perspective, using Apple Pay is simplicity itself: when making a purchase from within an app on your device, it takes just a single tap to select Apple Pay. Your details are then auto-filled, and all you have to do is place your finger on the Touch ID sensor to authenticate - and that’s it: payment made.

You can make these in-app payments on iPhone 6/6+, iPhone 6S/6S+, and the latest generation of iPads.

Using Apple Pay in-store

Making a payment in-store is just as easy: hold your phone near to the NFC terminal, and your phone will automatically wake with your card ready to pay. The only thing left to do is confirm, using the Touch ID sensor.

To use Apple Pay in-store, you’ll need a shiny new Apple device - the iPhone 6/6+, iPhone 6S/6S+, or an Apple Watch paired with an iPhone 5 or later. These devices have NFC chips inside, and act just like your contactless card.

Safe and sound

Unsurprisingly, security and privacy have been - and remain - high on Apple Pay’s priority list and a range of methods are used to ensure the service is secure.

Firstly, it uses your fingerprint to authenticate the payment, providing more security than the familiar PIN.

For most users, your card details are also already pre-loaded from the card you use in iTunes or the App Store. Otherwise, though, the process for adding a supported card is very straightforward. An Apple Pay compatible device also ensures your card details are anonymous when shared with merchants.

The device also generates a one-off and transaction-specific three-digit CSV code so that even if your card data was captured, it would be rendered useless. If you lose your phone, the card data cannot be used without your fingerprint and can be wiped remotely using Apple’s ‘Find my iPhone’ feature, without having to order a new physical card.

The impact of Apple Pay

We’re not predicting the end of plastic - well, not yet anyway. There is a long way to go before we can consistently rely on the technology we carry, or wear, to replace our cards.

Instead what Apple Pay, and the launch of similar services from competitors like Google, highlights is that user expectations of payments will - and are - changing. And we know that customers ultimately measure experiences against the best they have had - not just against your competitors.

While it is still relatively early days in the UK, we have seen in the U.S. that businesses offering customers the opportunity to pay with Apple Pay have had great success already. In the 72 hours following Apple Pay’s launch, there were over one million card activations - and by January 2015, Apple Pay accounted for two thirds of contactless payments in the U.S.

It’s important to remember that success isn’t only evident in taking loads of payments, but also in improving the overall experience of parting with your money.

Seamless payments made in-app reduce the risk of customers abandoning baskets in frustration, and therefore driving up revenue. One-tap payment in-store, meanwhile, speeds up queues and reduces the number of staff/hours at the till.

Both cases give people another reason to return to you - or not, if your competitors are already making payment more seamless than you.

Brett Thornton - Senior Strategist, The App Business