It is thanks to the rise of smart devices, ubiquitous Wi-Fi and fast mobile broadband that consumers increasingly expect their technology interactions to be quick and straightforward. Unfortunately this doesn't necessarily translate well to the finance sector. While banking apps are useful, they often aren't user-friendly.
Apple Pay changes the paradigm. It’s rare that I use a service for the first time and in that moment of truth, not only like the experience, but love it. I actually smiled as I completed my first Apple Pay transaction for my breakfast in the Pret a Manger below our office.
There’s something magical about the whole process. It’s so frictionless with few barriers to use, from scanning a card, to the physical transaction, to being able to link directly to more information about the brand you’ve just bought from.
The likes of Visa and MasterCard need to catch up and find new ways of adding value to their customers. Of all the big UK banks, Barclays has pursued a remit of trying to lead the charge to become the most digitally mature bank on the High Street. Its own bPay technology is a natural extension of this.
In the longer term, the banks' greater challenge is, arguably, to remain relevant. Their dominant position risks being eroded by new entrants into the payment transactions market, such as the cryptocurrencies. This may go some way to explain why all of the major UK banks have now announced their support for Apple Pay. After all, it's better they take a hit on paying a small processing fee to Apple than get cut out of the loop altogether.
Conversely, most consumers' financial relationships have tended to be held exclusively with the banks to date. Apple, and other consumer brands, will need to work hard to establish the level of trust that people had ascribed to banks, albeit this has been greatly eroded in recent years.
Contactless payment isn't new, but previous attempts have created a sense of separation from the transaction process in which the payment is rendered almost invisible. Apple Pay and bPay make it much easier to quantify how much you are spending. The former automatically displays the payment on the screen itself and you can review your last ten transactions. This offers an incredibly powerful sense of what you've been doing, when and how you spend your money. Conceptually you could even link this data to third party visualisation tools to offer new ways of reviewing your spending habits. There's a world of opportunity both for users and for Apple itself.
By comparison, the advantage of bPay is its top-up approach. You're always aware of your funds ticking down. While this could be seen as a constriction compared to the Apple service, it does offer peace-of-mind and greater security, which leads me to assume a core market here is parents.
Although adoption rates for these types of services are slow at the moment, they will grow as people come to understand the technology better. One key factor that could be holding back Apple Pay, in particular, is security, or at least perceptions of security.
Apple already holds credit card details for millions of people using its iTunes service. However, consumers may struggle with having to entrust their financial details to Apple outside of its closed ecosystem. The company also needs to convince potential customers they are going to do the right thing with their information. Of course, there are numerous examples of consumer businesses that haven't always respected that data in the past.
From a psychological perspective, moving the process from the online world to the physical one makes the payment more tangible. There's also the issue that the device may be stolen or hacked. The truth of the matter is that the encrypting of card information, coupled with fingerprint verification, makes Apple Pay, if anything, more secure than traditional cards or payment technologies using Near Field Communication.
Security and privacy concerns aside, the mass market simply isn't aware of or doesn’t understand e-payments. Even some retailers, particularly small businesses, don't know the option is available to them. However, if there's one company that has demonstrated that it has the clout to shake up an entrenched market, it's Apple. Ultimately it will be Apple Pay that will make this technology a mass market proposition.
The significance of Apple Pay is how it fits with other services. Each one extends the benefit of buying into Apple to its users. It is the convergence into a seamless one device, online and offline, ecosystem that makes me believe Apple Pay is the shape of things to come.
It is for this reason I'm less convinced by bPay as a mainstream concern. The fact you have to both pay for and carry around another piece of paraphernalia presents two major barriers to entry. Apple's strategy to converge services around the user's smart devices just seems so much more elegant. I suspect that if it does prove successful, bPay will eventually have to migrate towards an on-device environment. This perhaps seems a step back to a previous generation of mobile banking apps, but it's also the most convenient approach - and surely that's the USP for e-payments.
Edward Tomalin, Client Partner, Head
Image Credit: Shutterstock/Bloomua