The fanfare surrounding the launch of Apple Pay in the UK has led some to proclaim that it is the beginning of the end for cash. Notes and coins, which have been used to symbolise wealth for more than two thousand years of human civilisation, have managed to co-exist alongside bank cards, but smartphones may well provide the final nail in the coffin.
Looking at the US launch of Apple Pay, it is easy to see why many are suggesting that e-commerce will become the dominant mode of economic transaction. Despite only being available since October last year, the service already accounts for more than $2 out of $3 spent using contactless payment across the US’s three major credit card networks.
In the UK, 22 major retailers already offer Apple Pay as a payment method, including the likes of Starbucks and Waitrose, while another eight are already confirmed as coming soon. Moreover, it's not only Apple that expects mobile payments to really take off. Google Wallet is scheduled to be relaunched as Android Pay later this year and will use fingerprint scanners and support typed passwords or drawn patterns as alternative ID checks. Samsung Pay is also scheduled for release in September.
Another factor to consider when heralding the end of cash payments is the success that Apple has experienced in the past with its consumer technologies. The iPod, iPhone and iPad have shaken up the music, smartphone and tablet industries, with many predicting that the Apple Watch will cause a boom in the wearable sector. With a history of disruptive technologies, it’s not outlandish to suggest that Apple Pay could upset long-established economic behaviour.
Moreover, some industries have already moved towards a cashless environment. Buses in London no longer accept cash payments, with travellers required to use either a contactless bank card or a pre-paid Oyster card. As the public mind-set becomes more accustomed to fulfilling transactions without cold hard cash, e-commerce will surely grow in popularity.
That being said there are hurdles to be overcome for both Apple Pay and mobile payments more generally. Firstly, although support for the platform is promising, it is still extremely limited in terms of the number of purchases taking place every day. As well as retailers and banks having to agree to Apple Pay’s terms, consumers will also need either an iPhone 6, iPhone 6 Plus or Apple Watch to make purchases in-store or an iPad Air 2 or iPad Mini 3 if they just want to make online purchases. Apple claims that there are currently 2.9 million Apple Pay compatible devices in use in the UK, but this is just under 3.5 per cent of the estimated 83.1 million mobile handsets and data connections in the UK. Clearly Apple can’t instigate the mobile payments revolution on its own.
And while there are many mobile payment apps, not all of them have proved successful. Google Wallet has been in existence since 2011, but its upcoming re-brand is evidence of its lack of popularity with consumers. Samsung Pay, meanwhile, has suffered delays, and even Apple Pay has experienced setbacks – one of the world’s largest banks HSBC unexpectedly decided not to participate in the launch. Pinar Ozcan, assistant professor of strategic management at Warwick Business School, believes that such setbacks can have a significant impact on consumer opinion.
"What has always been a struggle is for Apple Pay and the competitors to build a large enough ecosystem of merchants and bank partners in order to enable immediate adoption,” he said. “While it is not clear why HSBC has decided not to support Apple Pay's UK launch, it certainly rings alarm bells as consumers often have a 'now or never' approach to new technologies, easily deciding not to adopt for a long time if it is cumbersome to do so at the beginning."
Apple may have conquered the music and mobile scenes, but money is likely to prove more of a challenge. Coins and notes have been a staple of daily life for much longer and people are less likely to trust new technologies with something as important as their personal finances than say, their digital album collection. Moving to a completely cashless society is not something that we are likely to see for some time.
Technology, however, does not stand still and should mobile payments prove their utility in the long term, they will be adopted on a large scale. Users of the first ATM card, issued by Barclays in 1967, may too have been sceptical, but they are now firmly entrenched in the daily lives of millions all over the world. Just like that first bank card, Apple Pay is an exciting development, but I wouldn’t give up on cash just yet.
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