Experts Assess Apple’s Entry into Mobile Payments

Apple this week confirmed its anticipated entry into the mobile payments arena, with the launch of Apple Pay – a system that will enable smartphone users to make purchases by holding their phone near a sensor.

The company’s chief executive officer (CEO), Tim Cook, said that Apple was seeking to replace wallets.

Cook described Apple Pay as a secure, private system that could make it easier and faster to purchase items. The announcement came at a product launch event that also marked the release of Apple’d newest smartphones, the iPhone 6 and the iPhone 6 Plus and also the company’s new smart watch called the Apple Watch.

Apple Pay, which will work with each of these devices, uses a near field communication (NFC) antenna and a secure chip. Users can swipe a mobile device armed with the programme to make a payment at a supported retailer. They can store their credit card information by taking a picture of their cards with an iPhone camera.

Apple said that the system keeps transaction data confidential and credit information stored on the phone will also be kept private from the company.

The mobile payment system works with credit and debit cards issued through American Express, MasterCard and Visa, along with major US banks such as Bank of America, Capital One Bank, Chase, Citi and Wells Fargo.

Apple Pay will be available for use in all 258 of Apple’s US retail stores and will also be supported by major American retailers such as Macy’s, McDonald’s and Walgreens.

Partnerships the key

Commenting on the announcement, John Gessau, mobile payments solutions lead at ACI Worldwide, commented that Apple’s move had given the mobile payments industry a boost and carried several implications.

“At long last we have NFC built into the hardware – an addition long speculated, and often disappointed,” said Gessau. “For years there have been two camps regarding NFC, one predicting its demise and the other its rise as a key technology in mobile payments. Thanks to the recent wave of industry support for host card emulation (HCE), and now with Apple adding NFC, this settles the debate rather convincingly.

“That’s not to say that NFC will dominate everything, but it certainly goes a long way in addressing the chicken-and-egg problem and means that industry players will have a lot more reason to support NFC payments. Together with TouchID and the Secure Element, not to mention the integration with Apple Watch, the complimenting technologies look quite promising and quite exciting.

“What is far more significant is the effort Apple have expended in partnering with key industry players to pave a pathway toward success. Their approach of making the value of the wallet greater to both participants and consumers, paves the way to ensure wide acceptance, greater relevance and thus broad adoption of their wallet. This is where other players have failed, despite the inclusion of compelling technology.

“Their list of key banks, card associations and especially retailers is impressive. Not everyone can pull off such a level of agreements – although to be fair Apple is perhaps one of the few companies who can. But was it simply up to good negotiating skills? Did Tim Cook strike a deal with everyone as he did with U2? No. Apple’s trump card today was that they’ve decided to let the banks and the merchants own the big data.

“This is truly significant, since in one statement they took a massive stab at some of their biggest competition, and at the same time opened the door to everyone else. They didn’t even talk about loyalty, rewards, coupons and the like. They didn’t need to. It will now come to them from willing participants who need not feel threatened.”



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